Question

The bank balance sheet below lists the categories of assets and liabilities, along with the total amount of each
category, and the amount in each category that is "interest rate sensitive" or repriced within one year.
Calculate the existing Dollar Gap for the bank. Next, calculate the effect (change) on this bank's Net Interest
Income if interest rates fall or decrease by 1 percentage point or 100 bp. "%" denotes either the current
interest rate earned earned or paid on the designated asset or liability category. RSA and RSL denote interest
rate sensitive assets and liabilities, respectively, that are repriced within one year. Note, you do not have to
include either the existing or new level of Net Interest Income, as I'm only asking for the change in Net Interest
Income. Please show your work in order to receive credit.

  

Assets	Amount	%	RSA		Liabilities and Equity	Amount	%	RSL
Cash	80	0.0%			Non-interest deposits	100	0.0%
Securities	250	6.0%	100		NOW checking	200	2.0%
Loans, net	620	7.0%	248		MMDA	300	4.0%	300
Fed funds sold	0				CDs	150	5.0%	75
Non-earning assets	50				Fed Funds purchased	150	3.0%	150
	$1,000				Equity	100
						$1,000

Answer 1

Dollar GAP = RSA-RSL RSA: 100 +248 = 348 RS2 = 300 +75+ 150=525 Dollar GAP=RSA-RSL = 348-525 :-177 present Nil= (250 x 6%) + (620x71.]]-[(200 x 2%) + (300x41.) + 150x54.) +(150X37:)) -[(250*0.66)+(620x6.0 7)]- [(200X0.02)+ Geoxo.or)+(150X0.05)+(150x6-03)] - 58.4 - 28 = 30.4 Now Interest Rate falls by I/ Revised NIT = [L150x67.)+(100x57.)]+2372*77.) +248x576) -[(200*24.) +(300x37.)+(75x5/.+(75*47) +(180x24.) = 54.92 - 22.75 = 32.17 Win Decrease By: 32.17 - 30.4 1.77