Interest Rate Risk

QUESTION 4C. INTEREST RATE RISK (6 MARKS) Bank Delta has the following balance sheet: Assets Amount Rate earned Liabilities and Amount Rate paid (Smillion) per annum Equity ($million) per annum 3-month Treasury 250 5.5% 6-month 450 5% notes certificates of deposit 2-year variable 550 7% 7-year term 2.0 6% rate loans (rate deposits (fixed adjusted monthly) rate) 8-year fixed-rate 8.5% 30-year 100 % loans subordinated debt (fixed rate) Premises (non 50 Equity 200 earning) 150 Total 1000 Total 1000 Calculate Bank Delta's one-year repricing gap. (3 marks) (11) Assume interest rates are anticipated to increase by 25 basis points for Rate Sensitive Assets, and increase by 50 basis points for Rate Sensitive Liabilities in the next 12 months Calculate the expected change in the bank's Net Interest income. (3 marks) QUESTION 4C. INTEREST RATE RISK (6 MARKS) Bank Delta has the following balance sheet: Assets Amount Rate earned Liabilities and Amount Rate paid (Smillion) per annum Equity ($million) per annum 3-month Treasury 250 5.5% 6-month 450 5% notes certificates of deposit 2-year variable 550 7% 7-year term 2.0 6% rate loans (rate deposits (fixed adjusted monthly) rate) 8-year fixed-rate 8.5% 30-year 100 % loans subordinated debt (fixed rate) Premises (non 50 Equity 200 earning) 150 Total 1000 Total 1000 Calculate Bank Delta's one-year repricing gap. (3 marks) (11) Assume interest rates are anticipated to increase by 25 basis points for Rate Sensitive Assets, and increase by 50 basis points for Rate Sensitive Liabilities in the next 12 months Calculate the expected change in the bank's Net Interest income