If you can help answer these 4 questions please. 1. Bank Nishapur started its fi

Question

If you can help answer these 4 questions please.

1.      Bank Nishapur started its first day of operations with $10 million capital and received a total of $200 million dollar of deposits. The bank makes a $20 million of commercial loans and another $40 million in mortgage loans. If reserve ratio is 5%, what does bank balance sheet kook like?

2.       Suppose that Bank Agni has an $200 billion of assets with an average duration of 3 years, and has 150 million of liabilitieswith average duration of 5 years. What will be effect on the net worth of the bank if interestrate rises by 3%?What actions could bank take to reduce bank

Explanation / Answer

2) profit = 200 * 3 *0.03 = 18

loss = 150 * 5 *0.03 = 22.5

so net loss = 4.5

so net worth decreases..........bank should reduce its liabilities to reduce its risk

3) profit = 200 * 3 *0.03 = 18

loss = 150 * 5 *0.03 = 22.5

so net loss = 4.5

so net worth decreases..........bank should reduce its liabilities to reduce its risk

4) if interest rate falls then gap will reduce because rate sensitive liabilities are greater then rate sensative assets. To reduce gap liabilities should be reduced or assets should be increased

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