## Various Risks Finance Analysis Help With Solution

BaldwinTronics Bank has a $1 million position in a five-year, zero-coupon bond with a face value of $1,402,552. The bond is trading at a yield to maturity of 7.00 percent. The historical mean change in daily yields is 0.0 percent, and the standard deviation is 12 basis points.

1. What is the modified duration of the bond?

2. What is the maximum adverse daily yield move assuming we desire no more than a 5 percent chance that yield changes will be greater than this maximum?

3. Using the modified duration, what is the price volatility of this bond?

4. What is the daily earnings at risk for this bond?

5. What would be the VAR for a 10-day period?

Use the following information to answer problems 6 through 8.

Export Bank has a trading position in Japanese Yen and Swiss Francs. At the close of business on February 4, the bank had ¥300,000,000 and Swf10,000,000. The exchange rates for the most recent six days are given below:

Exchange Rates per U.S. Dollar at the Close of Business

2/4 2/3 2/2 2/1 1/29 1/28

Japanese Yen112.13112.84112.14115.05116.35116.32

Swiss Francs1.41401.41751.41331.42171.41571.4123

6. On a dollar basis, calculate the foreign exchange (FX) positions using the FX rates on February 4.

7. Calculate the volatility (standard deviation) of the change in exchange rates for each currency over the five-day period (1/29-2/4). To do so, calculate the % change on a daily basis and then calculate the standard deviation for each position.

8. Determine the bank’s DEAR for both positions assuming a 90% confidence level.

**Off-Balance-Sheet Risk**

9. BaldwinTronics has been approved for a $75,000 loan commitment from its local bank. The bank has offered the following terms: term = 1 year, up-front fee = 85 basis points, back-end fee on the unused portion = 35 basis points, and rate on the loan = 7.75%. BaldwinTronics expects to immediately take down $70,000 and no more during the year unless there is some unforeseen need. Calculate the total interest and fees BaldwinTronics can expect to pay on this loan commitment.

**Liquidity Risk**

10. A FI has the following assets in its portfolio: $30 million in cash reserves with the Fed, $20 million in T-Bills, and $50 million in mortgage loans. If the assets need to be liquidated at short notice, the FI will receive only 99 percent of the fair market value of the T-Bills and 90 percent of the fair market value of the mortgage loans. Estimate the liquidity index using the above information.

**Futures and Forwards**

Use the following information to answer problems 11 through 15.

Consider the following balance sheet (in millions) for a FI:

AssetsLiabilities

Duration = 5.72 years $950Duration = 3 years$860

Equity$90

11. What is the FI’s leveraged adjusted duration gap?

12. What is the FI’s interest rate risk exposure?

13. How can the FI use futures and forward contracts to set up a macrohedge?

14. What is the impact on the FI’s equity value if the change in interest rates is DR/(1+R) = 0.015?

15. Suppose that the FI macrohedges using Treasury bond futures that are currently priced at 96 ($96,000 per contract), how many Treasury bond futures contracts does it need to enter into? Assume that the deliverable Treasury bond has a duration of nine years.

## How it Works

#### How It works ?

**Step 1:- **Click on Submit your Assignment here or shown in left side corner of every page and fill the quotation form with all the details. In the comment section, please mention **product code** mentioned in **end of every Q&A Page**. You can also send us your details through our email id support@assignmentconsultancy.com with **product code** in the email body. **Product code** is essential to locate your questions so please mentioned that in your email or submit your quotes form comment section.

**Step 2:-** While filling submit your quotes form please fill all details like deadline date, expected budget, topic , your comments in addition to **product code** . The date is asked to provide deadline.

**Step 3:-** Once we received your assignments through submit your quotes form or email, we will review the Questions and notify our price through our email id. Kindly ensure that our email id assignmentconsultancy.help@gmail.com and support@assignmentconcultancy.com must not go into your spam folders. We request you to provide your expected budget as it will help us in negotiating with our experts.

**Step 4:-** Once you agreed with our price, kindly pay by clicking on Pay Now and please ensure that while entering your credit card details for making payment, it must be done correctly and address should be your credit card billing address. You can also request for invoice to our live chat representatives.

**Step 5:-** Once we received the payment we will notify through our email and will deliver the Q&A solution through mail as per agreed upon deadline.

**Step 6:-**You can also call us in our phone no. as given in the top of the home page or chat with our customer service representatives by clicking on chat now given in the bottom right corner.

## Features

#### Features for Assignment Help

**Zero Plagiarism**

We believe in providing no plagiarism work to the students. All are our works are unique and we provide Free Plagiarism report too on requests.

**Relevancy**

We believe in providing perfect, relevant and 100% accurate solutions to the student as per questions asked. All our experts are perfect in providing that so as to give unique experience to the students.

**Three Stage Quality Check**

We are the only service providers boasting of providing original, relevant and accurate solutions. Our three stage quality process help students to get perfect solutions.

**100% Confidential**

All our works are kept as confidential as we respect the integrity and privacy of our clients.

## Related Services

- Physics Assignment Help
- Chemistry Assignment Help
- Engineering Assignment Help
- Psychology Assignment Help
- Online exam Help
- Marketing Assignment Help
- Arts Assignment Help
- Sociology Assignment Help
- Project Management Assignment
- Case Study Help
- Nursing Assignment Help
- Research Assignment Help
- Operations Management Assignment help
- Accounting Assignment Help
- Biology Assignment Help
- Mathematics Assignment Help
- English Assignment Help
- Business Plan Help
- Essay Writing Help
- Human Resource Assignment Help
- Accounting Homework Help
- Computer Science Assignment Help
- Finance Assignment Help
- Economics Assignment Help
- Statistics Homework Help
- Management Assignment Help
- Strategy Management Assignment Help
- Auditing Assignment Help
- Information Management Assignment Help

- Online Assignment Writing help
- Best Assignment Help
- Humanities Assignment help

16. Village Bank has $240 million of assets with a duration of 14 years and liabilities worth $210 million with a duration of 4 years. In the interest of hedging interest rate risk, Village Bank is contemplating a macrohedge with interest rate futures contracts with a duration of 9 years, which are currently selling for $102,656. If the spot and futures interest rates move together, how many futures contracts must Village Bank sell to fully hedge the balance sheet?

**Options, Caps, Floors, and Collars**

Use the following information to answer problems 17 through 19.

A FI manager purchases a zero-coupon bond that has two years to maturity. The manager paid $76.95 per $100 for the bond. The current yield on a one-year bond of equal risk is 12 percent and the one-year rate in one year is expected to be either 16.65 percent or 15.35 percent. Either rate is equally probable.

17. Given the expected one-year rates in one year, what are the possible bond prices in one year?

18. If the manager buys a one-year option with an exercise price equal to the expected price of the bond in one year, what will be the exercise price of the option?

19. Given the exercise price of the option, what premium should be paid for this option?

Use the following information to answer problems 20 through 22.

A bank purchases a 3-year, 6 percent $5 million cap option on interest rates.

20. Assume interest rates are 5 percent in year 2 and 7 percent in year 3, what is the amount that the bank will receive at the end of year 2 and at the end of year 3?

21. Instead of a cap, if the bank had purchased a 3-year 6 percent floor with the same notional value and interest rates are 5 percent and 6 percent in years 2 and 3, respectively, what are the payoffs to the bank in each year?

22. In addition to purchasing the cap, if the bank also purchases a 3-year 7 percent floor and interest rates are 5 percent and 7 percent in years 2 and 3, respectively, what are the payoffs to the bank in each year?

**Swaps**

Use the following information to answer problems 23 and 24.

A U.S. bank agrees to a swap making fixed-rate interest payments of $12 million to a UK bank in exchange for floating-rate payments of LIBOR + 4 percent in British pounds on a notional amount of £100 million. The current exchange rate is $1.50/£. The interest payments will be exchanged at the end of the year at the prevailing rates.

23. At the end of year 1, LIBOR is 6 percent and the exchange rate is $1.50/£. What is the net payment paid or received in dollars by the U.S. bank?

24. At the end of year 2, LIBOR is 4 percent and the exchange rate is $1.10/£. What is the net payment paid or received in dollars by the U.S. bank?

**Loan Sales**

Use the following information to answer problems 25 and 26.

Good Bank:

Cash$200Deposits$1,000

Good loans$1,000Purchased funds$300

Bad Loans$380Equity$280

Total$1,580$1,580

Bad Bank:

Cash$240Bonds$120

Loans0Preferred stock$40

Common stock$80

Total$240$240

Bad Bank buys the bad loans for $232. The proceeds of the loan sale are used by Good Bank to pay off purchased funds.

25. What will be the total assets of Good Bank after the sale of the loans?

26. What will be the amount of equity on the balance sheet of Good Bank after the sale of the loans?

### Product Code :Fin87

To get answer for this question, kindly click here (Note: Don’t forget to write the product code in comment section)

You can also email us at assignmentconsultancy.help@gmail.com but please mentioned product code in the mail body while sending emails.You can browse more questions to get answer in our Q&A sections here.

## 2 thoughts on “Various Risks Finance Analysis Help With Solution”

Comments are closed.