A given bank has the following interestsensitive assets and liabilities on its balance sheet in million Kwacha 

 

Interest Rate Sensitive Assets Interest Rate Sensitive Liabilities

Government Securities Time Deposits

Loans Saving Deposits

If the interest rates rise by what is the change in net interest income assuming a parallel shift in the yield curve? Define the maturity bucket approach as an extension to the gap analysis, and how it can be used to manage interest rate risk.

b A bank has $ million in earning assets, a net interest margin of and a

year cumulative GAP of $ million. Interest rates are expected to increase by

If the bank does not want net interest income to fall by more than during the next year, how large can the cumulative GAP be to achieve the allowable change in net interest income?