Consider the following balance sheet positions for a financial institution: Rate-sensitive assets = $ 200 million;

Question:

Consider the following positions for a financial institution:
• Rate-sensitive assets = $ 200 million; Rate-sensitive liabilities = $ 100 million.
• Rate-sensitive assets = $ 100 million; Rate-sensitive liabilities = $ 150 million.
• Rate-sensitive assets = $ 150 million; Rate-sensitive liabilities = $ 140 million.
a. Calculate the repricing gap and the impact on net interest income of a 1 percent increase in interest rates for each position.
b. Calculate the impact on net interest income on each of the above situations assuming a 1 percent decrease in interest rates.
c. What conclusion can you draw about the repricing model from these results?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...