1. Consider the following bank balance sheet and associated average interest rates. The time frame for the rate sensitivity is one year. Figures are in thousands.

Assets	Amount	Rate	Liabilities & Equity	Amount	Rate
Rate sensitive	$103,300	3.3%	Rate sensitive	$91,600	0.8%
Fixed rate	161,400	4.5%	Fixed rate	181,850	2.1%
Nonearning	27,500		Nonpaying liabilities &Equity	18,750
Total	$292,200		Total	$292,200

1. Calculate the banks GAP, expected NII, and NIM if interest rates and portfolio composition remain constant during the year. This bank is positioned to profit if interest rates move in which direction?
2. Calculate the change in expected NII and NIM if the entire yield curve shifts 200 basis points higher during the year. Is this outcome consistent with the banks static GAP?
3. Suppose that, instead of the parallel shift in the yield curve in Part b, interest rates increase unevenly. Specifically, suppose that asset yields rise by 0.50% while liability rates rise by 0.75%. calculate the change in NII and NIM. Is this uneven shift in rates more or less likely than a parallel shift?
4. Suppose the bank converts $20,000 of RSLs to fixed-rate liabilities during the year and interest rates remain constant. What would the banks NII equal compared with the amount initially expected? Explain why there is a difference?