Below is AAA bank balance sheet. Assume average RSA duration is 3. Average RSL duration is...

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Below is AAA bank balance sheet. Assume average RSA duration is 3. Average RSL duration is 5. Assets Rate sensitive Asset 100 Rate sensitive Liabilities 120 1. Assuming an increase of 3% (from 5% to 8%) in interest rates for both assets and liabilities, what will happen to the bank income? Explain using gap analysis Liabilities 2. What if interest rates decreased by 3% (from 5% to 2%)? what will happen to the bank income? Explain using gap analysis 3. Assuming a decrease of 2% in interest rates (from 5% to 3%) for both assets and liabilities. What w happen to the market value of the net worth as a percentage of total assets. 4. What if interest rates increased by 3% (from 5% to 8%). What will happen to the market value of the net worth as a percentage of total assets? Explain using gap analysis. Below is AAA bank balance sheet. Assume average RSA duration is 3. Average RSL duration is 5. Assets Rate sensitive Asset 100 Rate sensitive Liabilities 120 1. Assuming an increase of 3% (from 5% to 8%) in interest rates for both assets and liabilities, what will happen to the bank income? Explain using gap analysis Liabilities 2. What if interest rates decreased by 3% (from 5% to 2%)? what will happen to the bank income? Explain using gap analysis 3. Assuming a decrease of 2% in interest rates (from 5% to 3%) for both assets and liabilities. What w happen to the market value of the net worth as a percentage of total assets. 4. What if interest rates increased by 3% (from 5% to 8%). What will happen to the market value of the net worth as a percentage of total assets? Explain using gap analysis.

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1 Increase of 3 in Interest Rates from 5 to 8 Given Ratesensitive assets RSA duration 3 years Ratese... View the full answer