Consider the following balance sheet for MMC Bancorp ($ millions):

a. Calculate the value of MMC’s rate-sensitive assets, rate-sensitive liabilities, and repricing gap over the next year.

b. Calculate the expected change in the net interest income for the bank if interest rates rise by 1 percent on both RSAs and RSLs and if interest rates fall by 1 percent on both RSAs and RSLs.

c. Calculate the expected change in the net interest income for the bank if interest rates rise by 1.2 percent on RSAs and by 1 percent on RSLs and if interest rates fall by 1.2 percent on RSAs and by 1 percent on RSLs.

Transcribed Image Text:

Assets Liabilities/Equity 1. Cash and due from $ 6.25 1. Equity capital (fixed) $ 25.00 2. Short-term consumer loans (1-year maturity) 62.50 2. Demand deposits 50.00 3. Long-term consumer loans (2-year maturity) 31.30 3. One-month CDs 37.50 4. Three-month T-bills 37.50 4. Three-month CDs 50.00 5. Three-month bankers' 5. Six-month T-notes 43.70 acceptances 25.00 6. 3-year T-bonds 75.00 6. Six-month commercial paper 75.00 7. 10-year, fixed-rate mortgages 25.00 7. 1-year time deposits 25.00 8. 30-year, floating-rate mortgages (reset every nine months) 50.00 8. 2-year time deposits 50.00 9. Premises 6.25 337.50 337.50