Question 20: Consider the following two banks: 0 Bank A has assets composed solely of...
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Question 20: Consider the following two banks: 0 Bank A has assets composed solely of a 10-year, 9%, zero-coupon bond a maturity value of $1,800,000 (calculate its current value). It is financed by a 12-year, 8% coupon, $1,000,000 face value bond to yield 9.5% return. . Bank B has assets composed solely of a 9-year, 10% coupon, $1.7 million bond with a 11% yield to maturity. It is financed wit a 8%, 16-year, zero-coupon bond with a maturity value $3,100,000. All securities, accept the zero-coupon bond, pay interest semi-annually and the zero-coupon bond has semi-annual compounding period. Suppose that interest rates are expected to rise by 100bps Show me the change in the values of the asset and the liabilities for each bank
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