FINEC Financial Management Control
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CHALLENGE 1
Consider two bonds with a coupon rate of 10% and a nominal value of 1 000 USD One of them has a maturity of 4 years, the other - 15 years. Assuming that the bond yield will rise from 10% to 14%, calculate the actual value of the bonds both before and after the change in interest rates. Explain the differences in the changes in exchange bonds. What is the bond carries a high interest rate risk for the bank?
TASK 2
The Bank maintains a portfolio of bonds with the following 4 lengths and proportions:
GOAL 3
The portfolio of the bank has 4 bonds. Rank the duration of the bonds. Explain the reasoning (quite logical reasoning without direct calculations).
GOAL 4
Explain why hedge banking porfelya in duration allows the bank to be sure that he will be able to fulfill its obligations under the liabilities in the specified period.
GOAL 5
What are the advantages and disadvantages of expected payments to the bank through the harmonization of financial flows in comparison with the duration of the agreement?
GOAL 6
The bank has to its credit a loan of 1,050 units with a final maturity of 4 years, income 20% per annum, and 5-year treasury bonds of 300 units, income-17% per annum. The bank pays interest on one-year time deposits in 780 units at the rate of 10% per annum, and 4-year certificates of deposit in 600 units at the rate of 13% per annum. The bank's capital - 120 units, cash - 150 units. The bank has just opened and all the balance sheet accounts - the market value.
Calculate the expected interest income and bank DGAP. How will the NII and the market value of the assets, liabilities and equity, if there is a one percent increase in interest rates?
Suggest an option hedging portfolio. Show that an increase in interest rates by 1% equity and net interest income of the bank will not change.
GOAL 7
The bank has to its credit a loan of 1,260 units with a final maturity of 3 years, income 25% per annum, and 4 years
Consider two bonds with a coupon rate of 10% and a nominal value of 1 000 USD One of them has a maturity of 4 years, the other - 15 years. Assuming that the bond yield will rise from 10% to 14%, calculate the actual value of the bonds both before and after the change in interest rates. Explain the differences in the changes in exchange bonds. What is the bond carries a high interest rate risk for the bank?
TASK 2
The Bank maintains a portfolio of bonds with the following 4 lengths and proportions:
GOAL 3
The portfolio of the bank has 4 bonds. Rank the duration of the bonds. Explain the reasoning (quite logical reasoning without direct calculations).
GOAL 4
Explain why hedge banking porfelya in duration allows the bank to be sure that he will be able to fulfill its obligations under the liabilities in the specified period.
GOAL 5
What are the advantages and disadvantages of expected payments to the bank through the harmonization of financial flows in comparison with the duration of the agreement?
GOAL 6
The bank has to its credit a loan of 1,050 units with a final maturity of 4 years, income 20% per annum, and 5-year treasury bonds of 300 units, income-17% per annum. The bank pays interest on one-year time deposits in 780 units at the rate of 10% per annum, and 4-year certificates of deposit in 600 units at the rate of 13% per annum. The bank's capital - 120 units, cash - 150 units. The bank has just opened and all the balance sheet accounts - the market value.
Calculate the expected interest income and bank DGAP. How will the NII and the market value of the assets, liabilities and equity, if there is a one percent increase in interest rates?
Suggest an option hedging portfolio. Show that an increase in interest rates by 1% equity and net interest income of the bank will not change.
GOAL 7
The bank has to its credit a loan of 1,260 units with a final maturity of 3 years, income 25% per annum, and 4 years
Total 15 decided in the control task. Scope of work - 34 pages