BÀI TẬP CHƯƠNG 3: QUẢN TRỊ TÀI SẢN – NỢ

(BÀI TẬP CUỐI CHƯƠNG SÁCH PETER ROSE, BANK MANAGEMENT AND
FINANCIAL SERVICES)

1. First National Bank of Bannerville has posted interest revenues of $63 million and
interest costs from all of its borrowings of $42 million. If this bank possesses $700 million in
total earning assets, what is First National’s net interest margin? Suppose the bank’s interest
revenues and interest costs double, while its earning assets increase by 50 percent. What will
happen to its net interest margin?

2. Commerce National Bank reports interest-sensitive assets of $870 million and

Interest-sensitive liabilities of $625 million during the coming month. Is the bank asset sensitive
or liability sensitive? What is likely to happen to the bank’s net interest margin if interest rates
rise? If they fall?

3. Peoples’ Savings Bank, a thrift institution, has a cumulative gap for the coming year of +
$135 million and interest rates are expected to fall by two and a half percentage points. Can you
calculate the expected change in net interest income that this thrift institution might experience?
What change will occur in net interest income if interest rates rise by one and a quarter
percentage points?

4. Suppose Carroll Bank and Trust reports interest-sensitive assets of $570 million and
interest-sensitive liabilities of $685 million. What is the bank’s dollar interest-sensitive gap? Its
relative interest-sensitive gap and interest-sensitivity ratio?

5. Suppose that a thrift institution has an average asset duration of 2.5 years and an average
liability duration of 3.0 years. If the thrift holds total assets of $560 million and total liabilities of
$467 million, does it have a significant leverage-adjusted duration gap? If interest rates rise, what
will happen to the value of its net worth?

6. Stilwater Bank and Trust Company has an average asset duration of 3.25 years and an
average liability duration of 1.75 years. Its liabilities amount to $485 million, while its assets
total $512 million. Suppose that interest rates were 7 percent and then rise to 8 percent. What
will happen to the value of the Stilwater bank's net worth as a result of a decline in interest rates?

7. U.S. Treasury bills are available for purchase this week at the following prices (based
upon $100 par value) and with the indicated maturities:

a. $98.50, 182 days.

b. $97.50, 270 days.
c. $99.25, 91 days.

Calculate the bank discount rate (DR) on each bill if it is held to maturity. What is the equivalent
yield to maturity (sometimes called the bond-equivalent or coupon equivalent yield) on each of
these Treasury Bills?

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8. Clarksville Financial reports a net interest margin of 2.75 percent in its most recent
financial report with total interest revenues of $95 million and total interest costs of $82 million.
What volume of earning assets must the bank hold? Suppose the bank’s interest revenues rises
by 5 percent and its interest costs and earnings assets increase by 9 percent. What will happen to
Clarksville’s net interest margin?

9. If a credit union’s net interest margin, which was 2.50 percent, increases 15 percent and
its earning assets, which stood originally at $625 million, rise by 20 percent, what change will
occur in the bank's net interest income?

10. Old Settlers State Bank has recorded the following financial data for the past three years
(dollars in millions):

Current Year Previous Year Two Years Ago

Interest revenues $80 $82 $84
Interest expenses 66 68 70
Loans (Excluding nonperforming) 400 405 400
Investments 200 195 200
Total deposits 450 425 475
Money market borrowings 100 125 75

What has been happening to the bank’s net interest margin? What do you think caused the
changes you have observed? Do you have any recommendations for Old Settlers management
team?

11. Twinkle Savings Association has interest-sensitive assets of $325 million, interest-
sensitive liabilities of $325 million, and total assets of $500 million. What is the bank’s dollar
interest-sensitive gap? What is Twinkle’s relative interest-sensitive gap? What is the value of its
interest-sensitivity ratio? Is it asset sensitive or liability sensitive? Under what scenario for
market interest rates will Twinkle experience a gain in net interest income? A loss in net interest
income?

12. Richman Bank,, N.A., has a portfolio of loans and securities expected to generate cash
inflows for the bank as follows:

Expected Cash Inflows of Annual Period in Which Cash Receipts Are

Principal & Interest Expected
Payments

$1,500,675 Current year

746,872 Two years from today
341,555 Three years from today
62,482 Four years from today
9,871 Five years from today

Deposits and money market borrowings are expected to require the following cash outflows:

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Expected Cash Outflows of Annual Period during Which Payments
Principal $ Interest Payments must be Made

$1,595,786 Current year

831,454 Two years from today
123,897 Three years from today
1,005 Four years from today
----- Five years from today

If the discount rate applicable to the previous cash flows is 5 percent, what is the duration of the
Richman’s portfolio of earning assets and of its deposits and money market borrowings? What
will happen to the bank's total returns, assuming all other factors are held constant, if interest
rates rise? If interest rates fall? Given the size of the duration gap you have calculated, in what
type of hedging should Richman engage7-12.

13. Given the cash inflow and outflow figures in Problem 11 for Richman Bank, N.A.,
suppose that interest rates began at a level of 5 percent and then suddenly rise to 5.75 percent. If
the bank has total assets of $5 billion and total liabilities of $4.5 billion, by how much would the
value of Richman’s net worth change as a result of this movement in interest rates? Suppose, on
the other hand, that interest rates decline from 5 percent to 4.5 percent. What happens to the
value of Richman’s net worth in this case and by how much in dollars does it change? What is
the size of its duration gap?

14. Watson Thrift Association reports an average asset duration of 7 years, an average
liability duration of 3.25 years. In its latest financial report, the association recorded total assets
of $1.8 billion and total liabilities of $1.5 billion. If interest rates began at 6 percent and then
suddenly climbed to 7.5 percent, what change (in percentage terms) wills this bond’s price
experience if market interest rates change as anticipated?

15. A financial firm holds a bond in its investment portfolio whose duration is 13.5 years. Its
current market price is $950. While market interest rates are currently at 7 percent for
comparable quality securities, a decrease in interest rates to 6.75 percent is expected in the
coming weeks. What changes (in percentage terms) will this bond’s price experience if market
interest rates change as anticipated?

16. A savings bank’s weighted average asset duration is 10 years. Its total liabilities amount
to $925 million, while its assets total 1 billion dollars. What is the dollar-weighted duration of
the bank’s liability portfolio if it has a zero leverage – adjusted duration gap ?

17. Blue Moon National Bank holds assets and liabilities whose average durations and dollar
amounts are as shown in this table:

Asset and Liability Items Avg.Duration(yrs) $ Amount

Investment Grade Bonds 12.00 $65.00

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Commercial Loans 4.00 $400.00
Consumer Loans 8.00 $250.00
Deposits 1.10 $600.00
Nondeposit Borrowings 0.25 $50.00

What is the weighted average duration of New Phase’s asset portfolio and liability portfolio?
What is the leverage-adjusted duration gap?

18. A government bond currently carries a yield to maturity of 7 percent and a market price
of $1161.68. If the bond promises to pay $100 in interest annually for five years, what is its
current duration?

19. Clinton National Bank holds $15 million in government bonds having a duration of 7
years. If interest rates suddenly rise from 6 percent to 7 percent, what percentage change should
occur in the bonds’ market price?

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