The following is the balance sheet of a VRY-SMPL Bank. All the items are recorded...
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Accounting
The following is the balance sheet of a VRY-SMPL Bank. All the items are recorded based on the book value and they were purchased at par value. Asset Liability 5 year semi-annual
| Asset |
| Liability |
|
| 5 year semi-annual 6.45%pa coupon | 250 | 6 months treasury bills | 250 |
| bond |
|
|
|
| 10 year 3.5% annual coupon bond | 100 | 6 year annual coupon (6.30%pa) bond | 300 |
| 10 year treasury bond 7.5 % semi | 350 | Equity | 150 |
| annual coupon |
|
|
|
|
|
|
|
|
|
| 700 |
| 700 |
1. Assume current market yield is flat at 6.5% p.a. What is the duration gap of the bank?
2. Using the duration gap estimated from question 6, what will happen to the net worth of the bank if the market yield goes up by 1.5%p.a.?
3. What is the maturity gap of the bank
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