Question

Calculate the repricing gap and impact on net interest income of a 1 percent increase in interest rates for the following positions:

a. Rate-sensitive assets = $138 million; Rate-sensitive liabilities = $69 million.

b. Rate-sensitive assets = $69 million; Rate-sensitive liabilities = $188 million

c. Rate-sensitive assets = $97 million; Rate-sensitive liabilities = $89 million. (For all requirements, negative amounts should be indicated by a minus sign. Enter your answers in millions rounded to 2 decimal places. (e.g., 32.16))

Answer 1

Solution:-

To calculate Repricing Gap and Net Interest Income-

A. Repricing Gap = Rate Sensitive Assets - Rate Sensitive Liabilities.

Repricing Gap = $138 Million - $69 Million

Repricing Gap = $69 Million

Net Interest Income = Repricing Gap * Increase in Interest Rate

Net Interest Income = $69 Million * 0.01

Net Interest Income = $0.69 Million

B. Repricing Gap = Rate Sensitive Assets - Rate Sensitive Liabilities.

Repricing Gap = $69 Million - $188 Million

Repricing Gap = -$122 Million

Net Interest Income = Repricing Gap * Increase in Interest Rate

Net Interest Income = -$122 Million * 0.01

Net Interest Income = -$1.22 Million

C. Repricing Gap = Rate Sensitive Assets - Rate Sensitive Liabilities.

Repricing Gap = $97 Million - $89 Million

Repricing Gap = $8 Million

Net Interest Income = Repricing Gap * Increase in Interest Rate

Net Interest Income = $8 Million * 0.01

Net Interest Income = $0.08 Million

A с E 1 2 3 4 5 A B C B Repricing Gap 69 -122 8 Miilion Miilion Miilion Net Interest Income 0.69 -1.22 0.08 Miilion Miilion Miilion

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