The balance sheet of A. G. Fredwards, a government security dealer, is listed below. Market yields are in parentheses, and amounts are in millions. Assets Cash Liabilities and Equity $ 20 Overnight repos $340 1-month T-bills (7.05%) 150 Subordinated debt 3-month T-bills (7.25%) 150 7-year fixed rate (8.55%) 300 2-year T-notes (7.50%) 100 8-year T-notes (8.96%) 200 5-year munis (floating rate) (8.20% reset every 6 months) 50 Equity 30 Total assets $670 Total liabilities and equity $670

a. What is the repricing gap if the planning period is 30 days? 3 months? 2 years?

b. What is the impact over the next three months on net interest income if in- terest rates on RSAs increase 50 basis points and on RSLs increase 75 basis points?

c. What is the impact over the next two years on net interest income if inter- est rates on RSAs increase 50 basis points and on RSLs increase 75 basis points?

d. Explain the difference in your answers to parts

(b) and (c). Why is one an- swer a negative change in NII, while the other is positive?