Assume that Westem Bank has the following balance sheet (in millions): Assets Liabilities and equity l-year...

 

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Assume that Westem Bank has the following balance sheet (in millions): Assets Liabilities and equity l-year term deposits (currently 100 3% annually) Cash 80 Variable-rate mortgage loan (currently 4.5% annually) 2-year variable-rate deposits (currently 3.5% annually) 80 130 3-year fixed-rate deposits (currently 3.8% annually) 10-year fixed-rate loans 320 150 (currently 3.8% anmually) 180 3-year personal loan (6%, repriced every year) 4-year deposit (4%, repriced every 2 years) 220 Ordinary Equity 6-year personal loan (6.5%, repriced every 3 years) 250 250 Inventories 40 Retained Earnings 100 Total assets 950 Total liabilities and equity 950 (a) What is Western Bank's expected net interest income at year-end? (6 marks) (b) What is the net interest income at year-end if interest rates increase by 50 basis point? What can you conclude from the result? (6 marks) (c) What is Western Bank's change in net interest income using repricing model based on the interest rates increase by 50 basis point? (3 marks) Assume that Westem Bank has the following balance sheet (in millions): Assets Liabilities and equity l-year term deposits (currently 100 3% annually) Cash 80 Variable-rate mortgage loan (currently 4.5% annually) 2-year variable-rate deposits (currently 3.5% annually) 80 130 3-year fixed-rate deposits (currently 3.8% annually) 10-year fixed-rate loans 320 150 (currently 3.8% anmually) 180 3-year personal loan (6%, repriced every year) 4-year deposit (4%, repriced every 2 years) 220 Ordinary Equity 6-year personal loan (6.5%, repriced every 3 years) 250 250 Inventories 40 Retained Earnings 100 Total assets 950 Total liabilities and equity 950 (a) What is Western Bank's expected net interest income at year-end? (6 marks) (b) What is the net interest income at year-end if interest rates increase by 50 basis point? What can you conclude from the result? (6 marks) (c) What is Western Bank's change in net interest income using repricing model based on the interest rates increase by 50 basis point? (3 marks)