In addition to the balance sheet, the Treasurer has determined that the weighted average duration of the bank's

assets is $5$ years whilst that of its deposits is $3$ years. The current $1-$year interest rates is $16\%$ and is forecasted to

decline to $14\mathrm{.}50\%$ in a year's time. The bank price its loans using the Ghana Reference Rate as required by Bank

of Ghana and demands $10\%$ compensating balance on all its loans. The bank charges $0\mathrm{.}75\%$ origination fees and

$3\%$ risk premium on all its loans. Also, $100\%$ of the short$-$term loans re$-$price every $3$ months, whilst $60\%$ of the

Long Term consumer loans re$-$price every $6$ months. The LongTerm Commercial loan is $100\%$ fixed whilst the

mortgage re$-$price every month.

On the deposit side, $25\%$ of both the demand and the savings account re$-$price every month. As a new recruits in

the Treasury department, the Treasurer has tasked you to help determine the following:

a$)$ The impact on bank's Net Interest Income over the next lyr if the decline in rates as forecasted tends to

be true.

b$)$ The impact on bank's Capital $($Net worth$)$

c$)$ The expected return on the bank's loan book if ABC's loan loss ratio is $5\%.($dyanll rate$)$

The current $91-$day Treasury Bill is $12\mathrm{.}47\%,$ Monetary Policy Rate is $13\mathrm{.}50\%$ and Interbank Overnight Rate is

$12\mathrm{.}61\%.$ Cash Reserve Requirement is $8\%$ whilst Cash$-$In$-$Vault is $2\%.$