Calculate the repricing gap and impact on net interest income of a 1 percent increase in interest rates for the following positions:
a. Rate-sensitive assets = $138 million; Rate-sensitive liabilities = $69 million.
b. Rate-sensitive assets = $69 million; Rate-sensitive liabilities = $188 million
c. Rate-sensitive assets = $97 million; Rate-sensitive liabilities = $89 million. (For all requirements, negative amounts should be indicated by a minus sign. Enter your answers in millions rounded to 2 decimal places. (e.g., 32.16))
Solution:-
To calculate Repricing Gap and Net Interest Income-
A. Repricing Gap = Rate Sensitive Assets - Rate Sensitive Liabilities.
Repricing Gap = $138 Million - $69 Million
Repricing Gap = $69 Million
Net Interest Income = Repricing Gap * Increase in Interest Rate
Net Interest Income = $69 Million * 0.01
Net Interest Income = $0.69 Million
B. Repricing Gap = Rate Sensitive Assets - Rate Sensitive Liabilities.
Repricing Gap = $69 Million - $188 Million
Repricing Gap = -$122 Million
Net Interest Income = Repricing Gap * Increase in Interest Rate
Net Interest Income = -$122 Million * 0.01
Net Interest Income = -$1.22 Million
C. Repricing Gap = Rate Sensitive Assets - Rate Sensitive Liabilities.
Repricing Gap = $97 Million - $89 Million
Repricing Gap = $8 Million
Net Interest Income = Repricing Gap * Increase in Interest Rate
Net Interest Income = $8 Million * 0.01
Net Interest Income = $0.08 Million
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