We are here with you hands in hands to facilitate your learning & don't appreciate the idea of copying or replicating solutions. Read More>>

Looking For Something at vustudents.ning.com? Click Here to Search

www.bit.ly/vucodes

+ Link For Assignments, GDBs & Online Quizzes Solution

www.bit.ly/papersvu

+ Link For Past Papers, Solved MCQs, Short Notes & More


Dear Students! Share your Assignments / GDBs / Quizzes files as you receive in your LMS, So it can be discussed/solved timely. Add Discussion

How to Add New Discussion in Study Group ? Step By Step Guide Click Here.

SEMESTER SPRING 2013
MONEY & BANKING (MGT411)
ASSIGNMENT # 02
DUE DATE: JUNE 26, 2013 MARKS: 30
ASSIGNMENT
Learning Objectives:
• The first question will enable the students to understand the preparation of commercial
bank’s balance sheet, how it differs from a balance sheet of non financial firms and what
will be the strategies of a bank to overcome liquidity risk.
• The second question will enable the students to understand the comparative
measurement of bank’s profitability and the effect of the interest rate risk on the
profitability and on the interest sensitive assets and liabilities of banks.
Case:
In any economy, commercial banks play very important role at both national and international
level. At national level, commercial banks play key role in the economic development. They help
various consumers, both individuals and businesses. Commercial banks make funds available for
the individuals and businesses that can make more productive use of the capital/ funds. If the
banking system of any country expands, it will make capital available for everyone, it will create
investment opportunities which results in the expansion of trade and industry that will create
more employment opportunities, consequently it results in the increase of per capita income and
rise in the overall national income. In the end economy flourishes and lead to economic
development. At international level commercial bank helps in transferring money from country
to country that eliminates the need to travel with the money. Beside this, the profit and success
of banking system directly affect the economic growth of a country. While bank performs its
activities and operation, it is always exposed to several kinds of risks; on the other hand bank
has to maintain its profitability because whatever the risk, it may hurts the profitability of a bank.
So, banks have to take pro-active measures to cope up with any kind of risk. The balance sheet
of banks shows its financial position, success and profitability.
“Shams Bank Ltd. “is a fast growing and emerging commercial bank, its financial figures and
data is given below:
Data Regarding the year 2012 Rs.
net profit after tax 5283200
Share capital Reserves 3043838
investment in securities 1846626
Inappropriate profit 656162
Liabilities against assets subject to finance lease 3091
Lendings to financial institutions 876870
Bills payable 840000
Borrowings from financial institutions 2122783
Balances with other banks 2672099
Cash and balances with treasury banks 5804405
Deposits and other accounts 4534126
Data Regarding Previous Years 2010 2011
Profit before tax 2065110 5433718
Total assets 9400000 10200000
Total liabilities 2875000 3550000
Bank capital 6525000 6650000
tax rate is 25%
Question 1: (15 marks)
a. From the above table and given data prepare the balance sheet of Shams Bank LTD. (7 marks)
b. If a bank has no excess reserves, how a bank will manage liquidity risk if a customer demands Rs 1.5
million cash withdrawals from the bank? What changes will occur in the Balance Sheet if the bank
decides to manage the liquidity risk through:
1. Adjusting assets by:
Paying 40% of the amount from loans and 60% of the amount from securities. (4 marks)
2. Adjusting liabilities by:
Attracting deposits with the same amount (4 marks)
(Note: Prepare balance sheet for each case)
Question 2: ( 15 marks)
a. As the bank is new, so its management keeps an eye on its profit on yearly basis, management needs
to compare its profitability with the past years. Using the figures of question 1 (part a), you are
required to compare the efficiency of bank in the utilization of its assets and equity in year 2012 as
compared to year 2011. (8 marks)
b. 30% of the assets are sensitive to change in interest rate while 70% are non- sensitive; interest rate on
assets is 7% (it yields Rs. 7 for every Rs. 100). 70% of the liabilities are sensitive to change in
interest rate while 30% are non-sensitive; interest rate on liabilities is 3%. How a decrease in interest
rate by 2% in year 2012 will affect the profit of the bank (per Rs. 100 in assets). (7 marks)
(Note: Show complete working, where necessary)
IMPORTANT:
24 hours extra / grace period after the due date are usually available to overcome uploading
difficulties. This extra time should only be used to meet the emergencies and above mentioned
due dates should always be treated as final to avoid any inconvenience.
OTHER INSTRUCTIONS:
The mentioned research paper titled “A Portfolio Decision Model Based on the Organizational
Development Strategy” is attached with assignment file and also uploaded on download section
of VULMS.
DEADLINE:
• Make sure to upload the solution file before the due date on VULMS.
• In case of VULMS problem any submission made via email after the due date will not be
accepted.
FORMATTING GUIDELINES:
• Use the font style “Times New Roman” or “Arial” and font size “12”.
• It is advised to compose your document in MS-Word format.
• You may also compose your assignment in Open Office format.
• Use black and blue font colors only.
REFERENCING GUIDELINES:
• Use APA style for referencing and citation. For guidance search “APA reference style” in
Google and read various website containing information for better understanding or visit
http://linguistics.byu.edu/faculty/henrichsenl/apa/APA01.html
RULES FOR MARKING
Please note that your assignment will not be graded or graded as ZERO (0), if:
• It is submitted after the due date.
• The file you uploaded does not open or is corrupt.
• It is in any format other than MS-Word or Open Office; e.g. Excel, PowerPoint, PDF
etc.
• It is cheated or copied from other students, internet, books, journals etc.
Note related to load shedding: Please be proactive
Dear students!
As you know that Post Mid‐Term semester activities have been started and load
shedding problem is also prevailing in our country now a days. Keeping in view
the fact, you all are advised to post your activities as early as possible without
waiting for the due date. For your convenience; activity schedule has already
been uploaded on VULMS for the current semester, therefore no excuse will be
entertained after due date of assignments or GDBs.

+ How to Follow the New Added Discussions at Your Mail Address?

+ How to Join Subject Study Groups & Get Helping Material?

+ How to become Top Reputation, Angels, Intellectual, Featured Members & Moderators?

+ VU Students Reserves The Right to Delete Your Profile, If?


See Your Saved Posts Timeline

Views: 3729

.

+ http://bit.ly/vucodes (Link for Assignments, GDBs & Online Quizzes Solution)

+ http://bit.ly/papersvu (Link for Past Papers, Solved MCQs, Short Notes & More)

+ Click Here to Search (Looking For something at vustudents.ning.com?)

+ Click Here To Join (Our facebook study Group)

Attachments:

Replies to This Discussion

Question #1 (b) Adjusting liabilities by attracting new deposits:

                                                                                                                                                                

Assets:

Cash and balance with treasury Banks                                                                    5,804,405

Balances with other Banks                                                                                       2,672,009

Lending to Financial Institutions                                                                                  876,870

Investment in securities                                                                                            3,346,626

                                                                                                                                12,700,000

Liabilities:

Bills Payable                                                                                                                   840,000

Borrowings from other institutions                                                                             2,122,783         

Deposits and other accounts                                                                                      6,034,126

Liabilities subject to finance lease                                                                                    3,091

Total liabilities                                                                                                             9,000,000

Net Assets (Rs. 12,700,000- 9,000,000)                                                                     3,700,000

 

Represented By:

Share Capital (Balancing figure)                                                                                7,400,000

Capital reserves                                                                                                        3,043,838

Inappropriate profit                                                                                                      656,162

                                                                                                                                    3,



Question 2 (a):

For 2012:

ROA = 5,283,200/ 11,200,000 = 0.4717

ROE = 5,283,200/7,400,000 = 0.7139

For 2011:

ROA = 4,075,289/10,200,000 = 0.40

ROE = 4,075,289/ 6,650,000 = 0.6128

From the calculations above, the shams bank ltd is more efficiently using its Assets and its return to owners  is also better than the previous year as shown in calculations above.

 

 you people can also add figures while concluding the comparison.

Items

Assets

Liabilities

Interest rate sensitive

Rs.30

Rs.70

Not interest rate sensitive

Rs.70

Rs.30

Initial interest rate

7%

3%

Profits after interest rate change:

7% - 2% = 5%

3% - 2% = 1%

 

Revenue from assets

Cost of liabilities

 

At initial interest rate

(0.07x30)+(0.07x70) = Rs.7

(0.03x70)+(0.03x30) = Rs.3

After interest rate change

(0.05x30)+(0.05x70) = Rs.5

(0.01x70)+(0.01x30) = Rs.1

Profits at initial interest rate:               (Rs. 7) – (Rs.3) = Rs. 4 per Rs. 100 in assets

Profits after interest rate change:         (Rs. 5) – (Rs.1) = Rs. 4 per Rs. 100 in assets

tariq bhai jo bhi correct answer hy us ko ap word ki file m post kar do na plz bhai

tariq bhai jo bhi correct answer hy us ko ap word ki file m post kar do na plz bhai

listen all of you faizan u too plzzz


Items
Assets
Liabilities

Interest rate sensitive
Rs.30
Rs.70

Not interest rate sensitive
Rs.70
Rs.30

Initial interest rate
7%
3%

Profits after interest rate change:
7% - 2% = 5%
3% - 2% = 1%


Revenue from assets
Cost of liabilities



At initial interest rate
(0.07x30)+(0.07x70) = Rs.7
(0.03x70)+(0.03x30) = Rs.3

After interest rate change
(0.05x30)+(0.07x70) = Rs.6.4
(0.01x70)+(0.03x30) = Rs.1.6

Profits at initial interest rate: (Rs. 7) – (Rs.3) = Rs. 4 per Rs. 100 in assets

Profits after interest rate change: (Rs. 6.4) – (Rs.1.6) = Rs. 4.8 per Rs. 100 in assets


li8 ab ai hai sorry my friends yar yeh right solution hai ap sab dekho interest rate jo change hoga wo non sensative item even not sensative asset or not sensative liablities dono pe old interest rate lage ga ok mene thek kr ke upload kardia hai kisi ko shak hai tu hand out ki hard copy ka page no83 dekh len faizan check this..


Thanks yar. mai nay last 5 mint. mai changing ke hain.. agar theak ho gia na...... http://www.facebook.com/muhammadyasir.khan.7

yeh book main di gai example show kar raha hun jahan smile bani he wo area note karen interest rate old hai not sensative assets and liablities pe..

The impact of an interest rate increase on bank profits (per $100 of assets)

Items Assets Liabilities

Interest rate sensitive $20 $50

Not interest rate sensitive $80 $50

Initial interest rate 5% 3%

New interest rate on interest rate

sensitive assets and liabilities

6% 4%

Revenue from assets Cost of liabilities

At initial interest rate (0.05×$20)+(0.05×$80)=$5.00 (0.03×$50)+(0.03×$50)=$3.00

After interest rate change (0.06×$20)+(0.05×$80)=$5.20 (0.04×$50)+(0.03×$50)=$3.50

Profits at initial interest rate: ($5.00) – ($3.00) = $2.00 per $100 in assets

Profits after interest rate change: ($5.20) – ($3.50) = $1.70 per $100 in assets

Gap analysis

Gap between interest rate sensitive assets and interest rate sensitive liabilities:

(Interest rate sensitive assets of $20) – (Interest rate sensitive liabilities of $50)

=(Gap of -$30)


Yasir you are welcom !

agr apne submit karwa di tu hogaya! main tu kab se yeh point out karna cha raha tha per loadsheding ne mar dala.... 

RSS

Latest Activity

Maria replied to imran's discussion ENG101 k quiz koi kara sakta hai plzz
2 hours ago
Maria replied to imran's discussion ENG101 k quiz koi kara sakta hai plzz
2 hours ago
NOORI added a discussion to the group SOC101 Introduction to Sociology
2 hours ago
NOORI joined +M.Tariq Malik's group
2 hours ago
NOORI added a discussion to the group ENG201 Business and Technical English Writing
2 hours ago
NOORI replied to Nasir's discussion Eng201. Quizz no 1.. Dated 01-06-2020 to 03-06-2020 in the group ENG201 Business and Technical English Writing
2 hours ago
Profile IconNOORI, Haroon Bahadar and Nasir joined +M.Tariq Malik's group
2 hours ago
+ ! ! ! ! ! ! !pคຖ໓คค ! ! posted a discussion
3 hours ago
naila mukhtar joined +M.Tariq Malik's group
3 hours ago
+ ! ! ! ! ! ! !pคຖ໓คค ! ! replied to MUHAMMAD ADIL JAVEED's discussion CS603 Software Architecture and Design | Assignment No 01 | Spring 2020 | Last date 01/06/2020 in the group CS603 Software Architecture and Design
3 hours ago
Profile Icon+ ! ! ! ! ! ! !pคຖ໓คค ! !, Muhammad Irshad and Saddam Hussain joined +M.Tariq Malik's group
4 hours ago
Haroon Bahadar liked Nasir's discussion Eng201. Quizz no 1.. Dated 01-06-2020 to 03-06-2020
4 hours ago

Today Top Members 

© 2020   Created by +M.Tariq Malik.   Powered by

Promote Us  |  Report an Issue  |  Privacy Policy  |  Terms of Service

.