If market interest rates are declining, the best interest-sensitive gap position for a bank is to:

a. Have a positive interest-sensitive gap

b. Have an interest sensitive ratio of 1.0

c. Have a negative-interest sensitive gap

d. Have a positive relative interest-sensitive gap

The purpose of asset-liability management is to:

1. Minimize loan losses
2. Control a banks sensitivity to changes in market interest rates
3. Maximize non-interest income
4. Control banks operating expenses

3) The following are a bank's interest-sensitive assets and interest-sensitive liabilities on its balance sheet and the rate sensitivity index:- Interest-sensitive Assets Loans Federal funds sold Investment in securities Leases $2,500,000 1,000,000 1,500,000 4,000,000 Rate Sensitivity Index 1.40 1.00 1.30 1.10. Interest-sensitive Liabilities CDs maturing in 3 months Money market deposits Other short-term deposits Savings deposits $3,500,000 5,000,000 6,000,000 500,000 Rate Sensitivity Index 0.70. 0.80 0.90- 0.60 (a) Calculate the dollar interest-sensitive gap adjusting for the interest rate sensitivity index. (17 points) (b) Interest rate decline by 0.50 percent (one-half of a percent). Using weighted balance sheet adjusted for the rate-sensitivity index, calculate the increase or decrease in bank's net interest income resulting from the decline in rates. (3 points) (c) If the bank's total assets are $18,000,000, calculate the interest sensitive ratio using IS assets and IS liabilities unadjusted for the rate-sensitivity index. (5 points) 3) The following are a bank's interest-sensitive assets and interest-sensitive liabilities on its balance sheet and the rate sensitivity index:- Interest-sensitive Assets Loans Federal funds sold Investment in securities Leases $2,500,000 1,000,000 1,500,000 4,000,000 Rate Sensitivity Index 1.40 1.00 1.30 1.10. Interest-sensitive Liabilities CDs maturing in 3 months Money market deposits Other short-term deposits Savings deposits $3,500,000 5,000,000 6,000,000 500,000 Rate Sensitivity Index 0.70. 0.80 0.90- 0.60 (a) Calculate the dollar interest-sensitive gap adjusting for the interest rate sensitivity index. (17 points) (b) Interest rate decline by 0.50 percent (one-half of a percent). Using weighted balance sheet adjusted for the rate-sensitivity index, calculate the increase or decrease in bank's net interest income resulting from the decline in rates. (3 points) (c) If the bank's total assets are $18,000,000, calculate the interest sensitive ratio using IS assets and IS liabilities unadjusted for the rate-sensitivity index. (5 points)