a: A bank today makes $100 in 3-year loans with a 7% fixed annual interest rate. It funds the loans today with $100 in 1-year CDs that currently have a 2% annual interest rate. What is the banks expected net interest income in the second year if interest rates rise by 1% tomorrow and remain at that level for the next two years?

b: A bank today makes $100 in 3-year loans with an 18% fixed annual interest rate. It funds the loans today with $100 in 1-year CDs that currently have an 8% annual interest rate. What is the banks expected net interest income in the second year if interest rates fall by 1% tomorrow and remain at that level for the next two years?

c: A bank today makes $100 in 3-year loans with a 16% fixed annual interest rate. It funds the loans today with $100 in 1-year CDs that currently have a 7% annual interest rate. It has the option of entering an interest rate swap contract. The contract includes a variable rate of 4.5% and a fixed rate of 7.5%. If the bank chooses to hedge its interest rate risk using a $100 notional value swap contract, what is the banks expected net interest income in the first year if all interest rates remain the same throughout the year?

d: A bank today makes $100 in 3-year loans with a 16% fixed annual interest rate. It funds the loans today with $100 in 1-year CDs that currently have a 7% annual interest rate. It has the option of entering an interest rate swap contract. The contract includes a variable rate of 4.5% and a fixed rate of 7.5%. If the bank chooses to hedge its interest rate risk using a $100 notional value swap contract, what is the banks expected net interest income in the second year if interest rates rise by 1% tomorrow and remain at that level for the next two years?