Question 35 Consider the following simple bank balance sheet; Assets Cash Interbank lending 3-month T-notes 2-year T-bonds 5-year corporate bonds (floating rate) (repriced @ six months) 2-year commercial loans (floating rate) (repriced @ six months) 15-year variable rate mortgages (repriced annually) 30-year fixed-rate mortgages (repriced monthly) Premises and equipment $ million 20 150 420 100 500 475 350 375 What is the re-pricing gap? 60 The bank's risk manager is considering the impact of interest rate changes for a six month planning period. Liabilities and equity Demand deposits Savings accounts 3-month CDs 6-month CDs 2-year CDs Interbank borrowings Overnight repos Subordinated debt: 7 year fixed rate Equity $ million 250 20 420 350 425 225 260 100 400 2 points Assume demand deposits act as core deposits for the bank and the implicit cost of these accounts is close to zero whereas savings accounts are likely to be drawn down if interest rate rise, forcing the bank to replace them with higher yielding funds. Save Answer Question 35 Consider the following simple bank balance sheet; Assets Cash Interbank lending 3-month T-notes 2-year T-bonds 5-year corporate bonds (floating rate) (repriced @ six months) 2-year commercial loans (floating rate) (repriced @ six months) 15-year variable rate mortgages (repriced annually) 30-year fixed-rate mortgages (repriced monthly) Premises and equipment $ million 20 150 420 100 500 475 350 375 What is the re-pricing gap? 60 The bank's risk manager is considering the impact of interest rate changes for a six month planning period. Liabilities and equity Demand deposits Savings accounts 3-month CDs 6-month CDs 2-year CDs Interbank borrowings Overnight repos Subordinated debt: 7 year fixed rate Equity $ million 250 20 420 350 425 225 260 100 400 2 points Assume demand deposits act as core deposits for the bank and the implicit cost of these accounts is close to zero whereas savings accounts are likely to be drawn down if interest rate rise, forcing the bank to replace them with higher yielding funds. Save