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Your bank has the following balance sheet: ASSETS LIABILITIES Rate-sensitive $100 million Rate-sensitive $75 million Fixed-rate $100 million Fixed-rate $120 million a) What would happen
Your bank has the following balance sheet: ASSETS LIABILITIES Rate-sensitive $100 million Rate-sensitive $75 million Fixed-rate $100 million Fixed-rate $120 million a) What would happen to bank profit if the interest rates in the economy go down? (hint: Calculate the dollar gap) b) Suppose the interest rate goes down by 2%? Calculate the change in the bank's profit. Is there anything that you could do to keep your bank from being so vulnerable to interest rate movements
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