1. Answer the following questions regarding the balance sheet given below. Assume 1 = $1.25.

a) Is this bank net short or net long?

b) What is the net interest income if the value of the appreciates to $1.50?

c) What is the net interest margin if the value of the depreciates to $1.10?

Assets Liabilities and Equity

$300M in USD $800M in USD

$700M in GBP $200M in GBP

Country Deposit Rate Lending Rate

US 2% 3%

UK 4% 5%