1. What is a maturity bucket in the repricing model? Do longer maturity buckets include more or less RSAs and RSLs? Do shorter maturity buckets include more or less RSAs and RSLs?

2.Which of the following fit the 1-year repricing test? In other words, which are rate sensitive? 3-month U.S. Treasury Bills

a. 1-year U.S. Treasury Notes

b. 20-year U.S. Treasury Bonds

c. 20-year floating-rate corporate bonds with annual repricing 30-year floating-rate mortgages with repricing every two years 30-year floating-rate mortgages with repricing every six months Overnight fed funds

d. 9-month fixed-rate CDs

e. 2-year fixed-rate CDs

f. 5-year floating-rate CDs with repricing every 30 days Common stock

3.Consider the following balance sheet positions for a financial institution:

• Rate-sensitive assets = $500 million. Rate-sensitive liabilities = $300 million
• Rate-sensitive assets = $200 million. Rate-sensitive liabilities = $350 million
• Rate-sensitive assets = $270 million. Rate-sensitive liabilities = $250 million

1. a)What is the impact on net interest income of a 1% decrease in interest rates for each position?
2. b)What is the impact on net interest income of a 1% increase in interest rates for each position?

4.A bank manager is quite certain that interest rates are going to fall within the next six months.

• Will the bank want a positive or negative repricing gap to take advantage of the fall?
• What if the manger believes rates will rise in the next six months?

5.he balance sheet below lists market yields in parentheses, and amounts are in millions.

Assets

Cash

1-month T-bills (7.05%)

3-month T-bills (7.25%)

2-year T-notes (7.50%) 200 8-year T-notes (8.96%) 310 5-year munis (floating rate)

(8.20% reset every 6 months)

Total assets

Liabilities and Equity

$40 Overnight repos $370 120 Subordinated debt

180 7-year fixed rate (8.55%) 290

50 Equity 240 $900 Total liabilities and equity $900

A.What is the repricing gap if the planning period is 30 days? 3 month days? 2 years?

B.What is the impact on net interest income over the next three months if interest rates on RSAs increase 50 basis points and on RSLs increase 60 basis points?

C.What is the impact on net interest income over the next two years if interest rates on RSAs .increase 50 basis points and on RSLs increase 75 basis points?