What are the duration of the assets portfolio

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Reference no: EM132661334

Assets (in Million $)

Cash $40 One-year mortgages (currently 10% annually): $100 (duration: 1 year)
5-year fixed-rate loans (7% annually): $360 (duration: 6.2 years)

Liabilities and Equity (in Million $)

1-year term deposits (currently 6% annually): $160 (duration: 1 year)

3-year term fixed-rate deposits (7% annually): $300 (duration: 2.7 years)

Equity: $40

Problem a. What will net interest income be at the end of the second year if interest rates rise by 2 per cent?

Problem b. Using the repricing gap model, what will ABC Bank's net interest income be for a 2 percent increase in interest rates (maturity bucket = 1 year)?

Problem c. What are the duration of the assets portfolio and duration of the liabilities portfolio?

Reference no: EM132661334

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