complete parts a and b

1. Consider the following balance sheet for Watchover Savings. Inc. in millions): Assets Liabilities and Equity Floating-rate mortgages (re-priced quarterly 1-year time deposits (currently 10% annually) $50 (currently 6% annually) $70 30-year fixed-rate loans year time deposits (currently 7% annually) $50 (currently 7% annually) $20 3. Equity $10 $100 Total assets Total liabilities & equity $100 A. Using the cumulative repricing gap model, what is the expected net interest income (for year 2) for a 2 percent increase in interest rates? PLEASE LABEL YOUR ANSWER AS "A" BELOW. (6) Recor B. What will expected net interest income (for year 2) be at year-end if interest rates on RSAs increase by 2 percent but interest rates on RSLS increase by 1 percent? Is it reasonable for changes in interest rates on RSAs and RSLs to differ? Why or why not? PLEASE LABEL YOUR ANSWER AS "B" BELOW.((7) HTML Editoram 1. Consider the following balance sheet for Watchover Savings. Inc. in millions): Assets Liabilities and Equity Floating-rate mortgages (re-priced quarterly 1-year time deposits (currently 10% annually) $50 (currently 6% annually) $70 30-year fixed-rate loans year time deposits (currently 7% annually) $50 (currently 7% annually) $20 3. Equity $10 $100 Total assets Total liabilities & equity $100 A. Using the cumulative repricing gap model, what is the expected net interest income (for year 2) for a 2 percent increase in interest rates? PLEASE LABEL YOUR ANSWER AS "A" BELOW. (6) Recor B. What will expected net interest income (for year 2) be at year-end if interest rates on RSAs increase by 2 percent but interest rates on RSLS increase by 1 percent? Is it reasonable for changes in interest rates on RSAs and RSLs to differ? Why or why not? PLEASE LABEL YOUR ANSWER AS "B" BELOW.((7) HTML Editoram