Managing Interest-Rate Risk Example: suppose that interest rates rise by 5 percentage point on average, from 10% to 15%. Conduct a gap analysis for the first national bank, and show what will happen to the banks profit. Assets Rate-sensitive assets Variable-rate and short-term loans Short-term securities Fixed-rate assets Reserves Long-term loans Long-term securities First National Bank $20 million $80 million Liabilities Rate-sensitive liabilities Variable-rate CDs Money market deposit accounts Fixed-rate liabilities Checkable deposits Savings deposits Long-term CDs Equity capital $50 million $50 million

Managing Interest-Rate Risk Example: suppose that interest rates rise by 5 percentage point on average, from 10% to 15%. Conduct a gap analysis for the first national bank, and show what will happen to the banks profit