(The following information relates to Questions 39 and 40)

SFO Bank has the following balance sheet:

AssetsReturnsAmounts

Liabilities & EquityCostsAmounts

Cash0.00%$35 m

Fixed-rate deposits3.50%$240 m

Investment (< 1 year)4.00%$400 m

Rate-sensitive deposits2.00%$360 m

Short-term loans

(maturity < 1 year)6.00%$280 m

Overnight funds

borrowings2.50%$75 m

Long-term fixed-rate

loans (> 1 year)6.75%$250 m

Long-term borrowings

Fixed-rate (> 1 year)5.50%$119 m

Equity$171 m

Total$965 m

Total$965 m

39.The bank's one-year interest-sensitive gap between assets and liabilities is

_____

A)$425 m

B)$245 m

C)$174 m

D)$126 m

40.If all interest rates on the two sides of balance sheet decline by 65 basis points, when other things are equal, what is the change in net interest income for this bank over the year?

_____

A)$1,400,000

B)-$1,400,000

C)$1,592,500

D)-$1,592,500

Hint: NII = (Gap)(R)