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[Solved] State Bank’s balance sheet is listed below. Market yields and durations (in years) are in parenthesis, and amounts are in millions

Q2) State Bank’s balance sheet is listed below. Market yields and durations (in years) are in parenthesis, and amounts are in millions.
Assets Liabilities and Equity S 20 Dand deposits $ 250 Cash Fed funds (1.05%, 0.02) T-bills (5.25%, 0.22) T-bonds (7.50%, 7.55) 150 300 200 MMDAs (2.5%,0.50) (no minimum balance requirement) CDs (4.3%, 0.48) 360 715 900 CDs (6%, 4.45) Fed funds (1%, 0.02) Commercial paper (3%, 0.45) Subordinated debt 1.105 515 400 Consumer loans (6%, 2.50) Commercial and industrial (C& loans (5.8%, 6.58) Fixed-rate mortgages (7.85%, 19.50 Variable-rate mortgages, 475 1,200 Fixed rate (7.25%, 6.65) 580 Total liabilities 120 Equity 200 $3,545 400 $3,945 repriced @ quarter (6.3%. 0.25) Premises and equipment Total liabilities and equity Total assets $3,945

A)What is State Bank’s duration gap?

B) Use these duration values to calculate the expected change in the value of the assets and liabilities of State Bank for the predicted increase of 1.5 percent in interest rates.

C) What is the change in equity value forecasted from the duration values for the predicted increase in interest rates of 1.5 percent?

Expert Answer

Answer to State Bank’s balance sheet is listed below. Market yields and durations (in years) are in parenthesis, and amounts are in millions…..

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