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

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A bank invested $50 million in a two-year asset paying 10 percent interest per year and simultaneously issued a $50 million, one-year liability paying 8 percent interest per year. 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 income if at the end of the first year all interest rates have increased by 1 percent (100 basis points)?

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Financial Institutions Management

ISBN: 9780078034800

8th Edition

Authors: Anthony Saunders, Marcia Cornett

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