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# MGT411 Assignment#02 Solution & Discussion Due Date:26-01-2011

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Anbody Share the Solution idea..!!!
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See the attached file for another idea solution
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thanks tariq bhai..!!;)
can anyone tell in part 1 of q1 which formula is used???

Q2.

See this

A commercial bank has following data: Total assets valued Rs. 1,000,000

 Items Assets Liabilities Interest rate sensitive 35% = 350000 45% = 450000 Interest rate non-sensitive 65% = 650000 55% = 550000 Initial interest rate 8% 5% New Interest rate 8% + 3% = 11% 5% + 3% = 8% Revenue from Assets Cost of Liabilities At initial interest rate 0.08* 350000 + 0.08*650000=80000 0.05*450000 + 0.05 * 55000=50000 After increase in interest rate 0.11*350000+0.08*650000= 90500 0.08*450000 + 0.05*55000=63500 Profit @ initial interest rate 80000 – 50000 = 30000 Profit @ new interest rate 90500 – 63500 = 27000 The Difference is = - 3000 = 3000 LOSS by increasing 3% rate.

Interest rate increase 3% both in assets and liability

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The Solution of Q. 1 (a) is as under:-
GAP =Interest sensitive assets ‐ interest sensitive liabilities
GAP = 350,000 ‐ 450,000
GAP = – 100,000

Difference in profit/Loss = GAP x % change in rate
Difference in profit/Loss = –100,000*0.03
Difference in profit/Loss = – 3,000
The Answer is in "negative" So loss prevails here.
this iz not Q1..plz can u tell which formula is used in q1 part 1??for M=?
u can see the formula at lecture num 35, but one thing I want to ask for, that the formula shown in hand outs it includes MB but in this solution there is no MB calculated. plz reply this Question who have upload the solution

Dear Tariq

The solution given for answer # 1 is wrong and i can assure it to you... The mistake is C/D ratio has been taken as 1.1 and 1.15 which is incorrect. Replace this by 0.1 and 0.15 and rest goes fine...

with 10% you should get value to be 4.5833 and with 15% it should be 3.965

Answer # 2 has solution to be Rs 60 billion difference.

Answer # 3 by you is correct. should be Rs 3,000 as loss.

Best Regards

BM
i agree , and also i need to know that the formulae in book includes MB . and this solution does'nt . what we shud do now
U shud not be concerned with MB...Your question asks for multiplier only so use only multiplier's equation and calculate it..

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