A bank invested $50 million in a two-year asset paying 10 percent interest per annum and simultaneously

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A bank invested $50 million in a two-year asset paying 10 percent interest per annum and simultaneously issued a $50 million, one-year liability paying 8 percent interest per annum. The liability will be rolled over after one year at the current market rate. What will be the impact on the bank's net interest in- come if at the end of the first year all interest rates have increased by 1 percent (100 basis points)?

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