(15) Q-1 The following is the balance sheet for Morgan Bank ($ millions): ASSETS LIABILITIES & EQUITY $170 150 320 Cash 1-month T-bills 3-month T-bills 2 years T-notes 8 years T-notes 5 years municipal bonds Total Assets $10 Overnight repos 75 7-year fixed rate debt 75 Total Liabilities 50 100 Equity 25 335 Total Liabilities & Equity 15 335 What is the re-pricing gap if the planning period is i) 3 months ii) 2 years? What will be the impact on net interest income if interest rate on all assets increases by 1% whereas it increases by 0.75% on all liabilities? Calculate separate for 3 months and 2 years bucket? In which scenario bank is exposed to interest rate risk. Devise a suitable strategy for mitigation of risk or otherwise. (15) Q-1 The following is the balance sheet for Morgan Bank ($ millions): ASSETS LIABILITIES & EQUITY $170 150 320 Cash 1-month T-bills 3-month T-bills 2 years T-notes 8 years T-notes 5 years municipal bonds Total Assets $10 Overnight repos 75 7-year fixed rate debt 75 Total Liabilities 50 100 Equity 25 335 Total Liabilities & Equity 15 335 What is the re-pricing gap if the planning period is i) 3 months ii) 2 years? What will be the impact on net interest income if interest rate on all assets increases by 1% whereas it increases by 0.75% on all liabilities? Calculate separate for 3 months and 2 years bucket? In which scenario bank is exposed to interest rate risk. Devise a suitable strategy for mitigation of risk or otherwise