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  3. consider the following two banks: bank 1 has asset

Consider the following two banks: Bank 1 has assets composed solely of a 10-year, 11.0...

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Accounting

Consider the following two banks: Bank 1 has assets composed solely of a 10-year, 11.0 percent coupon, $1.6 million loan with a 11.0 percent yield to maturity. It is financed with a 10-year, 10 percent coupon, $1.6 million CD with a 10 percent yield to maturity. Bank 2 has assets composed solely of a 7-year, 11.0 percent, zero-coupon bond with a current value of $1,133,012.90 and a maturity value of $2,352,316.24. It is financed by a 10-year, 5.25 percent coupon, $1,600,000 face value CD with a yield to maturity of 10 percent. All securities except the zero-coupon bond pay interest annually. a. If interest rates rise by 1 percent (100 basis points), what is the difference in the value of the assets and liabilities of each bank?

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