Consider the following two banks: Bank 1 has assets composed solely of a 10-year, 14.00 percent...

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Finance

Consider the following two banks: Bank 1 has assets composedsolely of a 10-year, 14.00 percent coupon, $3.0 million loan with a14.00 percent yield to maturity. It is financed with a 10-year, 10percent coupon, $3.0 million CD with a 10 percent yield tomaturity. Bank 2 has assets composed solely of a 7-year, 14.00percent, zero-coupon bond with a current value of $2,677,410.23 anda maturity value of $6,699,600.06. It is financed by a 10-year,8.25 percent coupon, $3,000,000 face value CD with a yield tomaturity of 10 percent. All securities except the zero-coupon bondpay interest annually. a. If interest rates rise by 1 percent (100basis points), what is the difference in the value of the assetsand liabilities of each bank? (Do not round intermediatecalculations. Negative amounts should be indicated by a minus sign.Round your answers to 2 decimal places. (e.g., 32.16))

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As a first step lets calculate the modified duration of each of the two sides of the balance sheet I have used the excel function namely DURATION and MDURATION to get the output Please see the table below Type Settlement Maturity Coupon Yield See Answer

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Consider the following two banks: Bank 1 has assets composed solely of a 10-year, 14.00 percent...

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Finance

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