The book value of DRAGON SLAYER BANKs balance sheet is listed below. The current market yield for the securities is in parentheses. The amounts are in millions.

1. What is the cumulative repricing gap if the planning period is

(a) 6 months :

(b) 2 year :

2. What will happen to the net interest income of the bank, if interest on the banks rate sensitive assets is forecasted to decrease by 60 basis points and rate-sensitive liabilities to increase 25 basis points in 6 months time?

Asset Liability & Equit Cash 6 month T-bills (4.25%) Demand deposits 300 50 100 100 90 100 Savings accounts (2.0%) 3 month CD (2.50%) 9 months CDs (3.85%) 1 year term deposit (4.0%) 2 year term deposits (4.30%) 205 150 150 520 200 2 year personal fixed rate loan at 6.50% 3 year T bills (4.85%) 3 year 5.5% semi-annual coupon T-notes (5.25%) 5 year 6.2% semi-annual coupon T-notes (5.75%) 5 year personal loan (1 1.5%, repriced yearly) 350 5 year bond 8.0% annual coupon issued by Spanish government with rating credit rating B 150 5-year bonds at 6.75% semiannual interest, balloon payment 250 20-year bonds at 7.5% interest, balloon payment 250 730 10 year commercial loan (12.25% repriced@6 months) Subordinate notes: 3-year fixed rate (5.65%) 6-year fixed rate (6.00%) 230 15-year commercial loan at 10% interest (repriced monthly) 220 150 20-year sovereign bonds 12.0% annual-coupon issued by Cambodian government with BB rating 150 Ordinary Equity Preference shares 20 20 390 20-year mortgages at 8.5% interest (LVR 65%, no mortgage insurance), balloon payment Retained Earnings 40 Total Assets 2485Total liability and equity 2485 Asset Liability & Equit Cash 6 month T-bills (4.25%) Demand deposits 300 50 100 100 90 100 Savings accounts (2.0%) 3 month CD (2.50%) 9 months CDs (3.85%) 1 year term deposit (4.0%) 2 year term deposits (4.30%) 205 150 150 520 200 2 year personal fixed rate loan at 6.50% 3 year T bills (4.85%) 3 year 5.5% semi-annual coupon T-notes (5.25%) 5 year 6.2% semi-annual coupon T-notes (5.75%) 5 year personal loan (1 1.5%, repriced yearly) 350 5 year bond 8.0% annual coupon issued by Spanish government with rating credit rating B 150 5-year bonds at 6.75% semiannual interest, balloon payment 250 20-year bonds at 7.5% interest, balloon payment 250 730 10 year commercial loan (12.25% repriced@6 months) Subordinate notes: 3-year fixed rate (5.65%) 6-year fixed rate (6.00%) 230 15-year commercial loan at 10% interest (repriced monthly) 220 150 20-year sovereign bonds 12.0% annual-coupon issued by Cambodian government with BB rating 150 Ordinary Equity Preference shares 20 20 390 20-year mortgages at 8.5% interest (LVR 65%, no mortgage insurance), balloon payment Retained Earnings 40 Total Assets 2485Total liability and equity 2485