Financial Risk Manager Part 2
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Q-74. Geofinancial Bank currently has the following (very) simplified balance sheet:
Assets
| Bonds | $30.0 |
| Loans | $70.0 |
| / | / |
Liabilities
| Deposits | $30.0 |
| Bonds | $50.0 |
| Equity | $20.0 |
Further, the maturities of these accounts are as follows:
Assets: The bonds ($30.0 million) expire in one year. In regard to the loans ($70.0), $40.0 million expire in five (5) years, $10.0 million expire in seven (7) years, and $20.0 million expire in ten (10) years.
Liabilities: In regard to the deposits ($30.0 million), $10.0 million expire in one (1) year, and $20.0 million expire in two (2) years. In regard to the bonds ($50.0 million), $10.0 million expire in five (5) years, $30.0 million expire in seven (7) years, and $10.0 million expire in beyond ten (>10) years.
Equity ($20.0 million) is presumed to expire in ten (10) years.
Which term structure of expected cumulative cash flows is accurate for Geofinancial Bank?
A
Year 1: +$20.0; Year 2: +$20.0; Year 5: +$30.0; Year 7: -$20.0; Year 10: +$20.0
B
Year 1: +$20.0; Year 2: +$20.0; Year 5: +$30.0; Year 7: -$20.0; Year 10: +$10.0
C
Year 1: +$20.0; Year 2: +$20.0; Year 5: +$30.0; Year 7: -$20.0; Year 10: +$30.0
D
Year 1: +$20.0; Year 2: +$20.0; Year 5: +$30.0; Year 7: -$20.0; Year 10: +$40.0
E
Year 1: +$20.0; Year 2: +$20.0; Year 5: +$30.0; Year 7: -$20.0; Year 10: +$50.0
F
Year 1: +$20.0; Year 2: +$20.0; Year 5: +$30.0; Year 7: -$20.0; Year 10: +$60.0