Reference no: EM131502692
An FI reports the following balance sheet (in thousands):
Assets Liabilities and Equity
2-year treasury note $175 1- year commercial Paper $135
15-year munis $165 5 year note 160
Total assets $340 Equity 45
Total Liabilities and Equity $340
All securities are selling at par equal to book value. The two-yearnotes are yielding 5 percent, and the 15- year munis are yielding 9 percent. The one-year commercial paper pays 4.5 percent, and the five-year notes pay 8 percent. All instruments pay interest annually.
a) What is the weighted -average maturity of the assets?
b)What is the weighted -average maturity of the liabilities?
c) What is the maturity gap?
d) What does your answer to part (c) imply about the interest rate exposure of the FI?
e) Calculate the values of all four securities on the FI’s balance sheet assuming that all interest rates increase 2 percent. What is the dollar change in the total asset and total liability values? What is the percentage change in these values?
f) What is the dollar impact on the market value of equity for Gunnison? What is the percentage change in the value of the equity?
g) What would be the impact on the market value of equity if the liabilities paid interest semiannually instead of annually