managment of banks and other financial institutions

The balance sheet for Emirates NBD is reported below all the reported values are market values, expressed in AED million). Assets Liabilities and equity Cash 20 Certificate of deposit 80 T-notes 50 Equity 30 Bonds 40 Total assets 110 Total liabilities and equity 110 The bonds have a 10-year maturity and a fixed rate coupon of 8 percent. The T-notes have a 5-year maturity and generate a fixed yield of 8%. The certificate of deposit has a one-year maturity and a 5 percent fixed rate of interest. The bank expects no additional asset growth 1. What will be the net interest income (NII) at the end of the first year? 2. If at the end of year one market interest rates have increased by 1 percent, what will be the net interest income (NNI) for the second year? is the result caused by reinvestment risk or refinancing risk? Explain you answer. 3. Assume that the T-notes have a 3-month maturity, if at the end of year one market interest rates have increased by 1 percent, what will be the net interest income (NNI) for the second year? BI HII IS X X