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Question 4 (25 Marks) Consider the following bank balance sheet and the associated average interest rates. The time frame for rate sensitivity is one year.
Question 4 (25 Marks) Consider the following bank balance sheet and the associated average interest rates. The time frame for rate sensitivity is one year. a) Calculate the bank's GAP, expected net income, and net interest margin if rates and portfolio composition remain constant during the year. 6 Marks) b) This bank is positioned to profit if interest rates move in which direction? Why? (2 Marks) c) Calculate the change in the expected net interest income and NIM if the entire yield curve d) Suppose instead of the parallel shift in the yield curve in part (iii) interest rates increase unevenly. Specifically, suppose the asset yields increase by 1 percent while liabilities rise by 1.75 percent. Calculate the change in net interest income and NIM. Is this uneven shift in rates more or less likely than a parallel shift in rates? Why
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