1. Study the following Balance Sheet. Based on its structure, what is the potential liability to the bank if interest rates decrease 1% during a 1-year period?

Bank A Balance Sheet (in $1,000,000s)
Assets		Liabilities
Cash & Cash Equivalents	$ 5.00	Demand Deposits	$ 508.00
Loans: Fixed-Rate		Passbook Accounts	$ 978.00
<6-month	$ 23.00	3-Mo Comm'l Paper	$ 2.70
6-12 months	$ 22.00	Time Deposits:
1-year	$ 134.00	1-year	$ 2,335.50
2-years	$ 142.00	2-year	$ 1,226.80
>15-years	$ 5,567.00	3-5 year	$ 928.40
Loans: Variable-Rate		30-bonds	$ 1,705.60
10-year variable	$ 345.00	Equity	$ 920.00
30-year variable	$ 2,367.00	OBS Liabilities
TOTAL:	$ 8,605.00		$ 8,605.00

1. No risk to the Bank, it has no repricing gap.
2. No risk to the Bank, it has a negative repricing gap.
3. The bank is exposed to about -$30 million for every 1% increase in interest rates, so the bank has negative repricing gap.
4. The bank is exposed to $30 million for every 1% in interest rates, so the bank has positive repricing gap.
5. None of the above.