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Consider the following asset and liability structures:

County Bank

Asset: $10 million in a one-year, fixed-rate commercial loan $5 million in a 6 month Treasury bill

Liability: $10 million in a three-month CD $5 million in a 6 month CD

City Bank

Asset: $10 million in a three-year, fixed-rate commercial loan $ 5 million in a two year Treasury Note

Liability: $10 million in a six-month CD $5 million in a three month CD

a) Calculate each bank’s three-month, six-month, and one-year cumulative GAP.

b) Which bank has the greatest interest rate risk exposure as suggested by each GAP measure? Consider the risk position over the different intervals.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91775356

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