A bank with a two-year horizon has issued a one-year certificate of deposit for $60 million at an interest rate of 1 percent. With the proceeds, the bank has purchased a two-year Treasury note that pays 3 percent interest. What risk does the bank face in entering into these transactions?

Explanation:

Annnual Interest Income = 60 million * (1+3%) - 7million

= 1.8million

Annual Interest Expense = 70 million * (1+1%) - 70 million

= 0.6 million

Profit = 1.8 million - 0.6 million

= 0.2million

If all interest rates were to rise by 1 percent, that essentially means the spread between Treasury note interest and CD interest remains the same as both the interest rates are increasing by 1 percent equally. Therefore, there won't be any effect on the profit of the bank.

If interest rate rise 1 percent, bank's profit in the second year falls to = 60 million *(3%-2%)

= 0.6 million

what

explanation:

the u.s. census bureau produces data on the population and economy nationwide. it can you to analyze the kind of people living in your neighborhood. it does not show you the market of people willing to buy your product or an existing market for your product. that will require more market research. the census bureau only gives you an insight to the demographics in your area.