# Question: A bank has the following balance sheet Suppose

A bank has the following balance sheet:

Suppose interest rates rise such that the average yield on rate- sensitive assets increases by 45 basis points and the average yield on rate- sensitive liabilities increases by 35 basis points.

a. Calculate the bank’s repricing GAP and percentage gap.

b. Assuming the bank does not change the composition of its balance sheet calculate the resulting change in the bank’s interest income, interest expense, and net interest income?

c. Explain how the CGAP and spread effects influenced the change in net interest income.

Suppose interest rates rise such that the average yield on rate- sensitive assets increases by 45 basis points and the average yield on rate- sensitive liabilities increases by 35 basis points.

a. Calculate the bank’s repricing GAP and percentage gap.

b. Assuming the bank does not change the composition of its balance sheet calculate the resulting change in the bank’s interest income, interest expense, and net interest income?

c. Explain how the CGAP and spread effects influenced the change in net interest income.

**View Solution:**## Answer to relevant Questions

Use the following information about a hypothetical government security dealer named J.P. Groman. (Market yields are in parentheses; amounts are in millions.)a. What is the repricing or funding gap if the planning period is ...Use the following balance sheet information to answer this question..:.a. What is the average duration of all the assets? b. What is the average duration of all the liabilities? c. What is the FI’s leverage- adjusted ...How does hedging with options differ from hedging with forward or futures contracts?In each of the following cases, indicate whether it would be appropriate for an FI to buy or sell a forward contract to hedge the appropriate risk. a. A commercial bank plans to issue CDs in three months. b. An insurance ...Answer the following. a. What is the duration of a 20-year 8 percent coupon (paid semiannually) Treasury bond (deliverable against the Treasury bond futures contract) selling at par? b. What is the predicted impact on the ...Post your question