What is the change in equity value forecasted

Reference no: EM132029709

PRACTICE PROBLEM - Bank Duration GAP: State Bank's balance sheet is listed below. Market yields and durations (in years) are in parenthesis, and amounts are in millions.

Assets		Liabilities and Equity
Cash	$20	Demand Deposits	$250
Fed Funds (5.05%, 0.02)	150	MMDAs (4.5%, 0.50)
T-bills (5.25%, 0.22)	300	(no minimum balance requirement)	360
T-bonds (7.50%, 7.55)	200	CDs (4.3%, 0.48)	715
Consumer loans (6%, 2.50)	900	CDs (6%, 4.45)	1,105
C&I loans (5.8%, 6.58)	475	Fed Fund (5%, 0.02)	515
Fixed-rate mortgages (7.85, 6.00)	1200	Commercial paper (5.05%, 0.45)	400
Variable-rate mortgages,		Subordinated debt:
repriced @ quarter (6.3%, 0.25)	580	Fixed-rate (7.25%, 9.65)	200
Premises and equipment	120	Total Liabilities	$3,545
		Equity	400
Total assets	$3,945	Total Liabilities and equity	$3,945

a. What is State Bank's duration gap?

b. Use these duration values to calculate the expected changed in the value of the assets and liabilities of State Bank for the New Fed Chair Powell's predicted increase of 0.25 percent in interest rates in June 2018.

c. What is the change in equity value forecasted from the duration values for the predicted increase in interest rates of 0.25 percent?

Reference no: EM132029709

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len2029709

6/25/2018 4:57:36 AM

Note - Here is an example practice problem. How much for that is similar the only things that change are some of the numbers in assets and liabilities but question stay the same. What is the change in equity value forecasted from the duration values for the predicted increase in interest rates.

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