1 Consider the following Balance Sheet for OPtiFin Commercial Bank (in millions)

ASSETS			LIABILITIES
Floating rate mortgages	100		Demand deposits	120
(currently 12% annually)			(currently 3% annually)
30 years fixed rate loans			1 year CD	30
(currently 7% annually)	70		(currently 6% annually)
			Equity	20
	170			170

a) What is OPtiFin Commercial Bank expected net interest income (NII) at year end? (1mark)

b) What is OPtiFin Commercial Bank expected net interest income at year end if interest rates decline by 300 basis points. (1 mark)

c) What is OPtiFin Commercial Bank expected net interest income at year end if interest rates fell by 500 basis points on assets, but decline by only 2% on liabilities.

(2 marks)

2 Provide a critical analysis and discussion on how the recent credit crunch (2007/2009) has affected the strategy of banks and the management of liquidity. (6marks). Support your views with at least three scholarly articles, journals or other credible sources At least 500 words.