In class problems-Rate Sensitive Gaps, March 28, March 29 1. Your professor received an email yesterday stating that the interest rate paid on savings HSBC deposits in the e-saver account from UAE would drop from 1.5% down to 0.10%, effective May 1, 2020. Let's assume that HSBC has 600 million dirhams in variable rate deposits affected by this change. It also 400 million in variable rate loans that earn 4.0% Assume that all interest rates fall by 1.4 percentage points. a. Determine the dirham gap for HSBC-UAE and indicate the sign b. Determine net interest income from variable rate instruments on an annual basis (ignoring any other sources of interest for the fiscal year ending on April 30 c. Determine net interest income from variable rate instruments on an annual basis (ignoring any other sources of interest for the fiscal year starting May 1, 2020 and going until April 30, 2021. d. Is HSBC better or worse off from this change alone? e. Should they have hedged against this downward change in interest rates? Why or why not? f. What type of interest rate change should they have hedged against and list at least 2 ways that could have done this. In class problems-Rate Sensitive Gaps, March 28, March 29 1. Your professor received an email yesterday stating that the interest rate paid on savings HSBC deposits in the e-saver account from UAE would drop from 1.5% down to 0.10%, effective May 1, 2020. Let's assume that HSBC has 600 million dirhams in variable rate deposits affected by this change. It also 400 million in variable rate loans that earn 4.0% Assume that all interest rates fall by 1.4 percentage points. a. Determine the dirham gap for HSBC-UAE and indicate the sign b. Determine net interest income from variable rate instruments on an annual basis (ignoring any other sources of interest for the fiscal year ending on April 30 c. Determine net interest income from variable rate instruments on an annual basis (ignoring any other sources of interest for the fiscal year starting May 1, 2020 and going until April 30, 2021. d. Is HSBC better or worse off from this change alone? e. Should they have hedged against this downward change in interest rates? Why or why not? f. What type of interest rate change should they have hedged against and list at least 2 ways that could have done this