Question
Shown below is the balance sheet for the Third National Bank of Andover, which lists the total asset and liability categories, as well as those
Shown below is the balance sheet for the Third National Bank of Andover, which lists the total asset and liability categories, as well as those amounts that are repriced within one year, i.e., the interest rate sensitive components of assets and liabilities.
Using ONLY the Dollar Gap procedure or method, calculate the effect on the Third National Bank of Andover's Net Interest Income if interest rates fall or decrease by 0.50 percentage points or 50 bp. The balance sheet below lists the current interest rate (the "%") received or paid on the various asset and liabilty categories, respectively. Interest rate sensitive components of assets and liabilties below that are repriced within one year are the RSA and RSL, respectively. Credit is only given for work that is shown, and only using the Dollar Gap method.
Assets | Amount | % | RSA | Liabilities and Equity | Amount | % | RSL | |
Cash | 80 | 0.0% | Non-interest deposits | 100 | 0.0% | |||
Securities | 270 | 5.5% | 130 | NOW checking | 170 | 2.0% | ||
Loans, net | 600 | 7.5% | 250 | MMDA | 330 | 4.0% | 330 | |
Fed funds sold | 0 | CDs | 160 | 5.0% | 80 | |||
Non-earning assets | 50 | Fed Funds purchased | 150 | 3.0% | 150 | |||
$1,000 | Equity | 90 | ||||||
$1,000 |
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