Chapter 07
Problem 01
Input Area:
Today’s price $1,195.00
Annual coupon payment $75.00
Time-to-maturity (years) 14.00
Redemption value $1,000.00
Output Area:
Yield to maturity 5.47%
Chapter 07
Problem 02
Input Area:
Today’s price $1,150.00
Annual coupon payment $75.00
Time-to-maturity (years) 14.00
Holding period (years) 5.00
Redemption value $1,000.00
Sales price after 5 years $940.00
Output Area:
Annual yield for 5 year holding period 3.09%
Chapter 07
Problem 03
Input Area:
T-bill price* Maturity (days)
T-Bill 1 $97.25 182
T-Bill 2 $95.75 270
T-Bill 3 $98.75 91
* Based on $100 par value
Output Area:
Discount
rates
T-Bill 1 5.44% 5.67%
T-Bill 2 5.67% 6.00%
T-Bill 3 4.95% 5.08%
Chapter 07
Problem 04
Input Area:
Original scenario
Net interest margin 2.75%
Total interest revenue (millions) $95.00
Total interest costs (millions) $82.00
Rise in interest revenues 5.00%
Rise in interest costs and earning assets 9.00%
Alternative scenario
Rise in interest revenues 5.00%
Rise in interest costs and earning assets 9.00%
Output Area:
Original
scenario
Alternative
scenario
Net interest margin 2.75% 2.01%
Total interest revenue (millions) $95.00 $99.75
Total interest costs (millions) $82.00 $89.38
Earning assets $472.73 $515.27
Rise in interest revenues 5.00% 5.00%
Rise in interest costs and earning assets 9.00% 9.00%
Chapter 07
Problem 05
Input Area:
Original scenario
Net interest margin 2.50%
Total assets (millions) $575.00
Rise in nim 10.00%
Rise in total assets 20.00%
Output Area:
Original
scenario
Alternative
scenario
Net interest margin 2.50% 2.75%
Total assets (millions) $575.00 $690.00
Rise in nim 10.00%
Rise in total assets 20.00%
New net interest income (millions) $18.98
Chapter 07
Problem 06
Input Area:
Original
scenario
Cumulative interest gap $25.00
Market rates 3.00%
Rise in cig 60.00%
Change in market interest rates 25.00%
Output Area:
Alternative
scenario
Cumulative interest gap $40.00
New net interest income (millions) $0.30
Chapter 07
Problem 07
Input Area:
Current Year Previous Year Two Years Ago
Interest revenues 82.00 80.00 78.00
Interest expenses 64.00 66.00 68.00
Loans (Excluding nonperforming) 450.00 425.00 400.00
Investments 200.00 195.00 200.00
Total deposits 450.00 425.00 400.00
Money market borrowings 150.00 125.00 100.00
Output Area:
Current Year Previous Year Two Years Ago
Earning Assets 650.00 620.00 600.00
Net Interest Margin 2.77% 2.26% 1.67%
Chapter 07
Problem 08
Input Area:
Coming Next Next More Than
Week 30 Days 31-90 Days 90 Days
Loans
$200.00 $300.00 $475.00 $525.00
Securities
$21.00 $26.00 $40.00 $70.00
Transaction deposits
$320.00 $0.00 $0.00 $0.00
Time Accounts
$100.00 $290.00 $196.00 $100.00
Money market borrowings $136.00 $140.00 $100.00 $65.00
Output Area:
Coming Next Next More Than
Week 30 Days 31-90 Days 90 Days
Loans
$200.00 $300.00 $460.00 $525.00
Securities
$21.00 $26.00 $40.00 $70.00
Interest Sensitive Assets
$221.00 $326.00 $500.00 $595.00
Transaction deposits
$320.00 $0.00 $0.00 $0.00
Time Accounts
$100.00 $290.00 $196.00 $100.00
Money market borrowings
$136.00 $140.00 $100.00 $65.00
Interest Sensitive Liabilities
$556.00 $430.00 $296.00 $165.00
GAP -$335.00 -$104.00 $204.00 $430.00
Cumulative GAP -$335.00 -$439.00 -$235.00 $195.00
Chapter 07
Problem 09
Input Area:
Interest-Sensitive Assets
Amount
Rate Sensitivity
Index
Federal fund loans
$50.00 1.00
Security holdings
$50.00 1.20
Loans and leases
$350.00 1.45
Interest-Sensitive Liabilities
Interest-bearing deposits $250.00 0.75
Money-market borrowings $90.00 0.95
Change in federal funds interest rate 0.50%
Output Area:
Interest-Sensitive Assets
Amount
Rate Sensitivity
Index
wted $ Amt
Federal fund loans
$50.00 1.00 50.00
Security holdings
$50.00 1.20 60.00
Loans and leases
$350.00 1.45 507.50
Total $450.00 $617.50
Interest-Sensitive Liabilities
Amount
Rate Sensitivity
Index
wted $ Amt
Interest-bearing deposits $250.00 0.75 $187.50
Money-market borrowings $90.00 0.95 $85.50
Total $340.00 $273.00
Change in net income using wisg $1.72
Chapter 07
Problem 10
Input Area:
Interest-sensitive assets (millions) $400.00
Interest-sensitive liabilities (millions) $325.00
Total assets $500.00
Output Area:
$ interest sensitive gap $75.00
Relative interest sensitive gap 0.15
Interest sensitive ratio 1.23
Chapter 07
Problems 11 & 12
Input Area: Problem 11
Expected Cash Flows Time
Expected Cash
Receipts
Expected Cash
Payments
11,275,600 1,295,500
2
746,872 831,454
3
341,555 123,897
4
62,482 1,005
5
9,871 0
Discount Rate 4.25%
Input Area: Problem 12
Total liabilities $18,000,000
Output Area: Problem 11
Duration gap 0.1739
Output Area: Problem 12
Change in the value of Net Worth $46,114.02
Chapter 07
Problem 13
Input Area:
Part 1 Part 2
Average asset duration 7 7
Average liability duration 4 4
Total assets 1,800,000,000 1,800,000,000
Total liabilities 1,500,000,000 1,500,000,000
Initial interest rate 5.00% 5.00%
Interest rate after change 6.00% 4.50%
Output Area:
Part 1 Part 2
Change in interest rates 1.00% -0.50%
Change in net worth (62,857,143) 31,428,571
Chapter 07
Problem 14
Input Area:
Duration of bond 15
Current market price $975.00
Current market rate 6.00%
Expected market rate 5.75%
Output Area:
Expected change in market rate -0.25%
Percentage price change for bond 3.54%
Chapter 07
Problem 15
Input Area:
Average asset duration 8.00
Total assets (millions) $1,250.00
Total liabilities (millions) $925.00
Leverage adjusted duration 0.00
Output Area:
Average liability duration 10.8108
Chapter 07
Problem 16
Input Area:
Asset and Liability Items
Avg. Duration
(years)
Dollar Amount
(millions)
Investment-grade bonds
15.00 $65.00
Commercial loans
3.00 $400.00
Consumer loans
7.00 $250.00
Deposits
1.25 $600.00
Nondeposit borrowings 0.50 $50.00
Output Area:
Total Earning Assets $715.00
Total Liabilities $650.00
Asset and Liability Items Weights Weights*duration
Investment-grade bonds 9.09% 1.3636
Commercial loans 55.94% 1.6783
Consumer loans 34.97% 2.4476
Deposits 92.31% 1.1538
Nondeposit borrowings 7.69% 0.0385
Duration of assets 5.49
Duration of liabilities 1.19
Leverage adjusted duration gap 4.41
Chapter 07
Problems 17
Input Area:
Expected Cash Flows Time Cashflows
1$100.00
2$100.00
3$100.00
4$100.00
5$1,100.00 ($4,633.60)
Current market price $1,168.49
Yield to maturity 6.00%
Annual coupons $100.00
Time to maturity 5.00
Output Area:
Expected Cashflows Time
PV of Expected
CFs
PV of Exp CFs * t
1 $94.34 $94.34 $0.00
2 $89.00 $178.00 $0.00
3 $83.96 $251.89 $0.00
4 $79.21 $316.84 $0.00
5 $821.98 $4,109.92 $0.00
$1,168.49 $4,950.98 $0.00
Duration of bond 4.24
Chapter 07
Problems 18
Input Area:
Duration of bond portfolio 12.00
Current market rate 6.00%
Expected market rate 7.00%
Output Area:
Expected change in market rate 1.00%
Percentage price change for bond -11.32%