Use the following information about a hypothetical government security dealer named J.P. Groman. (Market yields are in parentheses; amounts are in millions.) (LG 23-1)

Assets Liabilities and Equity Cash $ 10 Overnight repos $170 1-month T-bills (7.05%) 75 Subordinated debt 3-month T-bills (7.25%) 75 7-year fixed (8.55%) 150 2-year T-notes (7.50%) 50 8-year T-notes (8.96%) 100 5-year munis

(floating rate)

(8.20% reset every six months) 25 Equity 15 Total $335 Total $335

a. What is the repricing or funding gap if the planning period is 30 days? 91 days? 2 years? (Recall that cash is a non-interest-earning asset.)

b. What is the impact over the next 30 days on net interest income if all interest rates rise by 50 basis points?

c. The following one-year runoffs are expected: $10 million for two-year T-notes, $20 million for the eight-year T-notes. What is the one-year repricing gap?

d. If runoffs are considered, what is the effect on net interest income at year-end if interest rates rise by 50 basis points?

AppendixLO1