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Finance: Bally IPO proceeds;duration of a Class B CMO

1) An investment banker agrees to a firm commitment offering of 1.2 million shares of Bally stock. The offer price is set at $25.50 and the spread is 30 cents per share. If the stock is actually sold to the public at $26.00, however, what is the amount of funds Bally receives? (Ignore any other fees or expenses.)
$31,200,000
$30,600,000
$30,240,000
$29,280,000
$28,120,000

2) A bank has DA = 2.4 years and DL = 0.9 years. The bank has total equity of $82 million and total assets of $850 million. Interest rates are at 6%.

- If interest rates increase 100 basis points the predicted dollar change in equity value will equal:
$10,171,698
-$10,171,698
$12,724,528
-$12,724,528
$4,928,756

3) The typical duration of a Class B CMO is
1.5-3 years
3-5 years
5-7 years
7-10 years
18-20 years

Solution Preview

1 - Spread is difference between bid and ask price. Because the stock is sold @ $26 and ignoring fee/expenses. Bally would receives ...

Solution Summary

The solution answers questions related to Bally IPO proceeds; change in equity value based bank's duration of assets & duration of liabilities; duration of a Class B CMO.

$2.19