Use the following information about a hypothetical governmen
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Use the following information about a hypothetical government security dealer named J.P.Groman.
(Market yields are in parentheses; amounts are in millions.)
Assets Liabilities
Cash $10 Overnight repos $170
1-month T-bills (7.05%) $75 Subordinated debt
3-month T-bills (7.25%) $75 7-year fixed (8.55%) $150
2-year T-notes (7.50%) $50
8-year T-notes (8.96%) $100
5-year munis (floating rate) (8.20% reset every six months) $25 Equity $15
Total $335 $335
a. What is the repricing or funding gap if the planning period is 30 days? 91 days? 2 years? (Recall that cash is a noninterest-earning asset.)
b. What is the impact over the next 30 days on net interest income if all interest rates rise by 50 basis points?
c. The following one-year runoffs are expected: $10M for two-year T-notes, $20M for the eight-year notes. What is the one-year repricing gap?
d. If runoffs are considered, what is the effect on net interest income at year end if interest rates rise by 50 basis points?
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Hi,
Please see attached the Word file.
a. What is the funding or repricing gap if the planning period is 30 days? 91 days? 2 years? Recall that cash is a noninterest-earning asset.
Funding or repricing gap using a 30-day planning period = 75 170 = $95 million. Funding gap ...
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