1. An extract of the balance sheet of Magic Incorporated shows the following fixed and rate sensitive assets and liabilities. Assets Rate Sensitive Fixed Rate Non-earning Amount $42,000,000 $25,000,000 $ 3,000,000 Rate 8% 10% Liabilities Rate Sensitive Fixed Rate Equity Amount $50,000,000 $10,000,000 $10,000,000 Rate 10% 9% (a) What is the repricing gap for Magic Inc.? (b) What will be Magic's net interest income at year-end if interest rates do not change? (c) Suppose short-term interest rates increase by 1 percent. Calculate the change in net interest income after the interest rate increase. (d) If rates rise as indicated in c above, how should the bank adjust the repricing gap to take advantage of the anticipated rise? Explain. e) If rates were anticipated to fall instead, what strategy should be implemented? Explain. 1. An extract of the balance sheet of Magic Incorporated shows the following fixed and rate sensitive assets and liabilities. Assets Rate Sensitive Fixed Rate Non-earning Amount $42,000,000 $25,000,000 $ 3,000,000 Rate 8% 10% Liabilities Rate Sensitive Fixed Rate Equity Amount $50,000,000 $10,000,000 $10,000,000 Rate 10% 9% (a) What is the repricing gap for Magic Inc.? (b) What will be Magic's net interest income at year-end if interest rates do not change? (c) Suppose short-term interest rates increase by 1 percent. Calculate the change in net interest income after the interest rate increase. (d) If rates rise as indicated in c above, how should the bank adjust the repricing gap to take advantage of the anticipated rise? Explain. e) If rates were anticipated to fall instead, what strategy should be implemented? Explain