Consider the following bank balance sheet and associated average interest rates. Thetime frame for 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

a. 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?

b. Calculate the change in expected NII and NIM if the entire yield curve shifts 2percent higher during the year. Is this outcome consistent with the banks staticGAP?