The balance sheet of Wollongong FI is listed below. Market yields are in parentheses. Assets (Million $) Liabilities and Equity (Million $) Cash 20 1-month repos (1.0%) 240 1-month T-bills (7.05%) 150 2-year CD (6.0%) 100 3-month T-bills (7.25%) 150 Subordinated debt 3-year fixed rate (8.55%) 300 2-year T-notes (7.50%) 100 8-year Loan (8.96%) 200 5-year munis (floating rate reset, reset every 6 months) 50 Equity 30 Total liabilities and equity 670 Required: a. What is the repricing gap if the planning period is 30 days? 3 months? 2 years? (3 marks) b. What is the impact over the next three months on net interest income if interest rate decreases by 50 basis points on both RSAs and RSLs? (1 mark) c. What is the impact over the next two years on net interest income if interest rates on RSAs increase by 50 basis points and on RSLs increase by 60 basis points? (2 marks) d. Calculate the average maturity gap of this balance sheet. (2 marks) e. According to the maturity gap, is the Wollongong FI exposed to an increase or decrease in interest rate risk? Explain why? (2 marks)
Added by Steve M.
Step 1
The repricing gap is calculated by subtracting the rate-sensitive liabilities (RSLs) from the rate-sensitive assets (RSAs) for a given time period. For 30 days: RSAs = Cash + 1-month T-bills = 20 + 150 = 170 million. RSLs = 1-month repos = 240 million. Repricing Show more…
Show all steps
Your feedback will help us improve your experience
Akash M and 55 other Principles of Accounting educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Recommended Videos
'Zips Corp reports the following: Net Credit Sales 100,000 A/R Jan 1 10,000 ADA Jan 1 1,000 A/R Dec 31 15,000 ADA Dec 31 2,000 The Accounts Receivables Turnover Ratio is 10 9.09 100'
Aya Bianca I.
KMS corporation has assets with a market value of $500 million, $50 million of which are cash. It has a debt of $200 million and $10 million shares outstanding. Assume perfect capital markets.
Nick J.
Brenda's Bar and Grill has current liabilities of $15 million. Cash makes up 10 percent of the current assets and accounts receivable makes up another 40 percent of current assets. Brenda's current ratio is 2.1 times. Calculate the value of inventory listed on the firm's balance sheet. (Enter your answer in millions to 2 decimal places.
Rahul M.
Recommended Textbooks
Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD