NMIMS SOLVED ASSIGNMENTS

NMIMS SOLVED ASSIGNMENTS

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Treasury Management in Banking
1. Explain the concept of duration in bonds. Select at-least two bonds each from the below bonds with long term and short term maturities (eg 10 years as long term bond and 1-3 years as short term bond) and calculate their duration etc. Suggest which of these will outperform/ underperform in declining and rising interest rate scenarios. (Assume interest are being paid annually). You can use excel function (DURATION) to calculate duration
Symbol Coupon rate YTM Face value Last traded price Maturity date
NHAI 8.3 5.6384 1000 1235 25-Jan-27
NHAI 8.2 5.6276 1000 1133 25-Jan-22
SBIN 9.95 7.886 10000 11445 16-Mar-26
IFRC 8 5.1262 1000 1137 23-Feb-22
IIFCL 8.66 6.034 1000 1152.11 22-Jan-24
HUDCO 7.64 5.9595 1000 1180 08-Feb-31
IIFCL 8.91 5.8239 1000 1350 22-Jan-34
M&MFIN 9 9.0053 1000 1022.01 06-Jun-26

2. Below excerpts are from the balance sheet of a bank.
Balance Sheet for Hypothetical Bank
Particulars Assets Duration
(macaulay) Particulars Liabilities Duration
(macaulay)
Current Assets 800 12years Current liabilities 500 5 Years
Fixed Assets 200 Other Liabilities 200
Equity 300
1000 1000
1. What kind of risk you can able to demonstrate out of this balance sheet (The current market interest rates are 6%).
2. The bank wants to reduce this risk. Explain what tools are available for the bank to mitigating these risks?
3. Case Study:
The treasury team of XYZ bank is expecting the interest rates to increase in near future and hence decrease in the investment portfolio. The average YTM of the bonds in its portfolio is 8% and it is expecting it to go up to 9%.. The three months Libor is currently quoted at
a. Explain how interest rate futures help the bank to hedge this risk in short term. Explain this with various interest rates scenarios (5 Marks)
b. In another transaction this bank has entered into a 3x9 month forward. The three months MIBOR is 4% and 1 year MIBOR is at 5%. At what price the bank should quote this forward to the client? The markup spread of the bank is 1%.

NMIMS SOLVED ASSIGNMENTS

CONTACT- 9873368830

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