Problem 22-9 (LG 22-3)

Use the data provided for Gotbucks Bank, Inc., to answer thisquestion.

Gotbucks Bank, Inc. (in $ millions)
Assets			Liabilities and Equity
Cash	$	42	Core deposits	$	49
Federal funds		32	Federal funds		62
Loans (floating)		117	Euro CDs		142
Loans (fixed)		77	Equity		15
Total assets	$	268	Total liabilities and equity	$	268

Notes to the balance sheet: Currently, the fed funds rate is 9.7percent. Variable-rate loans are priced at 5 percent over LIBOR(currently at 12 percent). Fixed-rate loans are selling at par andhave five-year maturities with 13 percent interest paid annually.Assume that fixed rate loans are non-amortizing. Core deposits areall fixed rate for two years at 9 percent paid annually. Euro CDscurrently yield 10 percent.

a.	What is the duration of Gotbucks Bank’s (GBI) fixed-rate loanportfolio if the loans are priced at par? (Do not roundintermediate calculations. Round your answer to 3 decimal places.(e.g., 32.161))

Duration

years

b.	If the average duration of GBI’s floating-rate loans (includingfed fund assets) is .48 year, what is the duration of the bank’sassets? (Note that the duration of cash is zero.) (Do notround intermediate calculations. Round your answer to 3 decimalplaces. (e.g., 32.161))

Duration (assets)

years

c.	What is the duration of GBI’s core deposits if they are pricedat par? (Do not round intermediate calculations. Round youranswer to 3 decimal places. (e.g., 32.161))

Duration (deposits)

years

d.	If the duration of GBI’s Euro CDs and fed fund liabilities is.413 years, what is the duration of the bank’s liabilities?(Do not round intermediate calculations. Round your answerto 4 decimal places. (e.g., 32.1616))

Duration (liabilities)

years

e-1.	What is GBI’s duration gap? (Do not round intermediatecalculations. Round your answer to 4 decimal places. (e.g.,32.1616))

Duration gap

years

e-2.	What is the expected change in equity value if all yieldsincrease by 200 basis points? (Enter your answer in dollarsnot in millions. Negative amount should be indicated by a minussign. Do not round intermediate calculations.)

Expected change in equity value

$

e-3.	Given the equity change in e-2. what is the expected new marketvalue of equity after the interest rate change? (Enter youranswer in dollars not in millions. Negative amount should beindicated by a minus sign. Do not round intermediatecalculations.)

New market value

$