Bank

Executive SummaryAustralia intrust?s absorb aim flick discount be calculated using two unlike models which are the duration model and the PVBP model. Based on the education provided, the duration, modified duration and duration gap of its assets and liabilities are determined. The collision on the market value of equity due to a 1% increase in following enjoins is alike assessed. This is thus compared with the PVBP model. An assessment of Australia Bank?s Value at happen of infection and Daily Earnings at pretend was also carried taboo using one-year historical selective information from 3rd January 1995 to second January 1996. As managers of the bank, we have also assessed the interest rate risk for the bank if the central bank was going to increase the long cash market interest rate in the uprise future using futures contracts, forward rate agreements, options and swaps. Question 1a)The era and modified age of the assets subject to interest rate risk(see auxi liary 1 for details) age of AssetsDurationMarket ValueD*MVLoansFixed lodging 1.9076,543,000145,066,072.95Business Loans30 eld 0.0815,890,0001,318,870.0090 eld 0.2517,635,0004,408,750.00180 eld 0.5024,932,00012,466,000.002 old age (semi annual) 1.9127,759,00053,003,000.235 eld (semi annual) 4.3615,245,00066,448,905.1710 days (semi annual) 7.2312,596,00091,069,407.59Liquid AssetsGovernment Securities180 days 0.5029,310,00014,655,000.002 historic period (semi annual) 1.9134,567,00065,925,923.195 days (semi annual) 4.3835,000,000153,409,438.35Short Term SecuritiesOther Bank Bill 6 months 0.5026,626,00013,313,000.00316,103,000621,084,367.48Average Duration of AssetsDA = make out D*MV/Total Market Value =1.964816428Modified Duration of AssetsDmod = D/(1+r/f)LoansFixed Housing Loan 1.864826573Business Loans30 days 0.08296404990 days 0.249016385180 days 0.4920775512 years (semi annual) 1.8787747345 years (semi annual) 4.28882647910 years (semi annual) 7.11406672Liquid AssetsGovernment Securities180 days 0.492077! 5512 years (semi annual) 1.8766038585 years (semi annual) 4.312827718Short Term SecuritiesOther Bank Bill 6 months 0.492077551b)The Duration and Modified Duration of the liabilities subject to interest rate risk(see vermiform addition 2 for details)Duration of LiabilitiesDurationMarket ValueD*MVLong Term Liabilities2 years Semi-annual 1.9635,241,00068994093.685 years Semi-annual4.3922,235,00097584166.3710 years Semi-annual 7.8410,716,00084064168.78Current LiabilitiesShort Term Deposits1 month (30 days)0.0880,523,0006683409.003 months (90 days)0.2586,641,00021660250.006 months (180 days)0.5082,987,00041493500.00318,343,000320479587.83Average Duration of LiabilitiesDL... If you want to get a full essay, order it on our website: OrderEssay.net

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