Business, 29.04.2021 16:50 epicsushiman1

The bond has a 10-year maturity, a fixed-rate coupon of 11 percent paid at the end of each year, and a par value of $10,100. The certificate of deposit has a 1-year maturity and a 6 percent fixed rate of interest. The FI expects no additional asset growth. What will be the net interest income (NII) at the end of the first year? (Note: Net interest income equals interest income minus interest expense.) b. If at the end of year 1 market interest rates have increased 100 basis points (1 percent), what will be the net interest income for the second year? Is the change in NII caused by reinvestment risk or refinancing risk? c. Assuming that market interest rates increase 1 percent, the bond will have a value of $9,562 at the end of year 1. What will be the market value of the equity for the FI? Assume that all of the NII in part (a) is used to cover operating expenses or is distributed as dividends. d. If market interest rates had decreased 100 basis points by the end of year 1, would the market value of equity be higher or lower than $1,100? e. What factors have caused the changes in operating performance and market value for this FI?

Answers: 1

Show answers

Another question on Business

Business, 22.06.2019 07:30

Jordan, inc. sells fireworks. the company’s marketing director developed the following cost of goods sold budget for april, may, june, and july. april may june july budgeted cost of goods sold $62,000 $72,000 $82,000 $88,000 jordan had a beginning inventory balance of $3,000 on april 1 and a beginning balance in accounts payable of $14,600. the company desires to maintain an ending inventory balance equal to 15 percent of the next period’s cost of goods sold. jordan makes all purchases on account. the company pays 65 percent of accounts payable in the month of purchase and the remaining 35 percent in the month following purchase. required prepare an inventory purchases budget for april, may, and june. determine the amount of ending inventory jordan will report on the end-of-quarter pro forma balance sheet. prepare a schedule of cash payments for inventory for april, may, and june. determine the balance in accounts payable jordan will report on the end-of-quarter pro forma balance sheet.

Answers: 2

Answer

Business, 22.06.2019 09:20

Which statement best explains the relationship between points a and b? a. consumption reaches its highest point, and then supply begins to fall. b. inflation reaches its highest point, and then the economy begins to expand. c. production reaches its highest point, and then the economy begins to contract. d. unemployment reaches its highest point, and then inflation begins to decrease.

Answers: 2

Answer

Business, 22.06.2019 14:40

You are purchasing a bond that currently sold for $985.63. it has the time-to-maturity of 10 years and a coupon rate of 6%, paid semi-annually. the bond can be called for $1,020 in 3 years. what is the yield to maturity of this bond?

Answers: 2

Answer

Business, 22.06.2019 23:00

Investors who put their own money into a startup are known as a. mannequins b. obligators c. angels d. borrowers

Answers: 1

Answer

You know the right answer?

The bond has a 10-year maturity, a fixed-rate coupon of 11 percent paid at the end of each year, and...

Questions