Management of Fin Ins.

* Management of Financial Institutions: Fin 3505. Sample M1 Fall 2016

Practice Questions (The exam may be more challenging): Due Date: 10/10/2016

Note: Please complete the sample by due date and be ready to ask your questions in class. We will not have time to review all of the questions in class. Solutions will not be posted on Bb. Come ready!

Note: Please submit a complete set of detailed type-written answers for all problem and multiple choice questions in the beginning of the class (Just checking the answers will not be acceptable, unless no details are needed). Please keep another copy for our review.

Problems:

(Present the formulas you are using and show the details of your work. Write legibly).

1. The Mellon open-end fund, with 1M shares outstanding, has the following assets in its portfolio: 200,000 shares of P&G currently priced at $75, and 250,000 shares of Intel currently prices at $95, and 300,000 shares of Microsoft currently priced at $80. The Carnegie closed-end fund has the following stocks in its portfolio: 200,000 shares of REITs priced at $5 and $1B of real estate and 30-year mortgages. It has a total of 500,000 shares outstanding.

a. What is the total NAV and NAV per share of the Mellon and Carnegie funds?

b. If prices of all stocks rise by $10, what would be the new value of the Mellon fund shares?

c. Suppose Mellon issues 119,521 new shares of and purchases 100,000 new shares of P&G, what is its new NAV? Assume stock prices are the same as in part (a).

d. How are the two funds different?

2. The ABC bank has $100M assets consisting of $45M 1-year 7% coupon bonds and $55M of 10 year, 12% loans. Its liabilities include $75M 1 year 5% IR CDs, $20M 2-year 6% IR CDs, and $5M equity (all figures are in market values).

a. What is the weighted average maturity of the assets?

b. What is the weighted average maturity of the liabilities?

c. What is the FI’s maturity gap

d. Draw a...