Question: QUESTION 1 1. When interest rate changes, the impact on a bank's earnings depends on the repricing of their assets or liabilities. Loan A (7%,

QUESTION 1 1. When interest rate changes, the impact on a bank's earnings depends on the repricing of their assets or liabilities. Loan A (7%, 1 year) - $100 Loan B (10%, 2 years) - $200 Total Assets - $300 The net interest margin or spread Deposit A (2.5%, 3 months) -$250 Deposit B (5%, 1 year) = $50 Total Liabilities = $300 1% 2% 3% 5% 6% 796 8% 9% 10%

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