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Assets
Floating rate mortgages $ 40
(Currently 9% annually)
30-year fixed rate loans
(Currently 6% annually) 40
Total Assets 80
Liabilities and Equity
1-year time deposits
(currently 5% annually) $ 50
3-year time deposits
(Currently 7% annually) 20
Equity 10
Total liabilities and equity 80
What Is X’s expected net interest income at year end ? What will net interest income be if interest rates rise by 1 percent ? Using the cumulative repricing gap model, what is the expected net interest income for a 1 percent increase in interest rates ? What will net interest income be at year end if interest rates on rate sensitive assets increase by 1% but interest rates on rate sensitive liabilities increase by 0.5% ?
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