Balance Sheet Of First Bank Of Woebegone (FBW)

February 15, 2022

Balance Sheet Of First Bank Of Woebegone (FBW)

Table of Contents

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Instructions

Balance Sheet Of First Bank Of Woebegone (FBW)

Question Description

Consider the balance sheet of First Bank of Woebegone (FBW), a rather local bank:

ASSETS

25 Reserve account at the Federal Reserve Interest may change every 6 weeks at FOMC meetings

315 Auto loans, interest rate Changes yearly based on LIBOR

145 Credit card loans,
Interest rate based on 1-Year US, Treasury Note, adjusted every 4 months

800 Home mortgage loans, rates
Adjusted semi-annually based on 10-year Treasury bond

50 Bank premises

LIABILITIES AND CAPITAL
45 checking deposits, 0.1% annual interest

170 money market deposits, interest changes monthly

780 Nine-month time deposits, interest rate fixed during the nine months

210 Loans from other banks,
rates based on Prime Rate, changes weekly

195 Capital

a) What is the gap between FBW’s rate-sensitive assets and liabilities at 7 months maturity?
b) What is the gap between FBW’s rate-sensitive assets and liabilities at 14 months maturity?
c) How much would FBW’s net income change if all interest rates rose 3 percentage points 14 months from now?

EXPECTED VALUE DEFINITION: The expected value of a variable is the prediction we make given our knowledge of how likely it is that various outcomes happen, and our knowledge of the outcomes.

Example: a game where you get $2 each time a coin toss turns up heads, and $0 each time a coin toss turns up tails. We know that each outcome is equally likely—the probability of heads is 50%, and the probability of tails is 50%.

So the expected value of your winnings in this game is $2 x 0.5 + $0 x 0.5= $1. Note that we express the probability as a number between 0 and 1, using 0.5 to represent 50%, for example.

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The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.

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More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.

83-76 points

Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.

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Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.

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There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met