Reference no: EM133073981
1.Use the following information about a hypothetical government security dealer named M.P. Jorgan. Market yields are in parenthesis, and amounts are in millions.
Assets Liabilities and Equity
Cash $30 Overnight repos $270
1-month T-bills (7.05%) 100 3 Month CD. 60
Subordinated debt
3-month T-bills (7.25%) 95 7-year fixed rate (8.55%) 120
2-year T-notes (7.50%) 100
8-year T-notes (8.96%) 100
5-year munis (floating rate)
(8.20% reset every 6 months) 50 Equity 50
Total assets $500 Total liabilities & equity $500
a. What is the repricing gap if the planning period is 6 months?
b. The following one-year runoffs are expected: $10 million for two-year T-notes and $15 million for eight-year T-notes. What is the one-year repricing gap?
c. If runoffs are considered, what is the effect on net interest income at year-end if interest rates increase 65 basis points ?