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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
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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