In times of interest rate changes, mismatching between maturities of assets and liabilities can create investment and refinancing risk depending on the movement of the interest rate. If a bank receives 10 % fixed deposit of $ 100 and invest it in a 12% fixed loan of 100 million of 2 years, what is the impact on the Net Interest Income (NII) if market interest rate increases or decreases by 1%.

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To analyze the impact on Net Interest Income NII when the market interest rate changes we need to ca... View the full answer