Consider the balance sheet below. What is the net interest income? What is the net interest margin? What is the gap? What would these three measures become if short term interest rates fell by 1%? What would happen to the market value of equity?

Assets ( mm) Yield Liabilities Cost

Rate sensitive 1,600 6% 1,400 4%

Fixed rate 1,700 8% 1,900 6%

Non-earning/paying 500 400

Equity 100

Total 3,800 3,800