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QUESTION 4C. INTEREST RATE RISK (6 MARKS) Normanby Bank has the following information. Assets Amount (Smillion) Rate earned Liabilities and per annum Equity Amount Rate

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QUESTION 4C. INTEREST RATE RISK (6 MARKS) Normanby Bank has the following information. Assets Amount (Smillion) Rate earned Liabilities and per annum Equity Amount Rate paid ($million) per annum 250 5.5% 520 5% 3-month Treasury notes 6-month certificates of deposit 300 6.5% 350 6% 6-month personal loans (fixed rate) 2-year term deposits (fixed rate) 150 8.5% 180 7.5% 2-year corporate term loans (fixed rate) 30-year subordinated debts (variable rate adjusted quarterly) 550 7% Equity 250 30-year mortgage loans (variable rate adjusted monthly) Premises (non- earning) 50 Total 1,300 Total 1,300 (0 Calculate the one-year repricing gap (show all workings). (3 marks) (ii) The bank anticipates that in the next 12 months, interest rates on Rate-Sensitive Assets will increase by 70 basis points, and interest rates on Rate-Sensitive Liabilities will increase by 100 basis points. Calculate the expected change in Net Interest Income (show all workings)

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