18

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

Assets			Liabilities and Equity
Cash	$	22	Overnight repos	$	213
1-month T-bills (7.17%)		99	Subordinated debt
3-month T-bills (7.37%)		99	7-year fixed (8.67%)		162
2-year T-notes (7.62%)		62
8-year T-notes (9.08%)		112
5-year munis (floating rate) (8.32% reset every six month)		37	Equity		56
Total	$	431	Total	$	431

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

Select one:

a. NII will decrease by $570,000

b. NII will increase by $570,000

c. NII will decrease by $75,000

d. NII will increase by $75,000