ASSETS RETURN MILLION$ LIABILITIES AND EQUITY COST MILLION$
cash 0.00% $35 fixed-rate deposits 3.50% $240
investments(<1year) 4.00% $200 rate-sensitive deposits 2.00% $260
short-term loans(<1 year)6.00% $225 fed fund borrovigs 2.50% $25
long-term fixed rate loans (maturity>1 year) 6.75% $250 long-term borrowing fixed rate(maturity>1year) 5.50% $119
Total $710 equity $66
total $710
A bank has the following balance sheet:
Calculate the bank's one-year repricing gap (in millions of $).
Also, if interest rates decline by 100 basis points, estimate the change in the bank’s NII over the year.

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codiepienagoya codiepienagoya · Answer 1 · 2021-05-10T20:18:56+02:00

Answer:

Following are the responses to the given choices:

Explanation:

Please find the complete question:

1-year distance recovery = sensitive resources rate - liabilities sensitive rate

Rate sensitive assets = investments(<1 year) + short-term loans(<1 year)[tex]=\$(200+225)\ mn \\\\= \$425\ mn[/tex]

Dependent Rate=sensitive rate of deposits+ fed fund borrowing

[tex]=\$(260+25) \ million\\\\ = \$285 \ million.[/tex]

The difference in replicating gaps:

[tex]= \$(425-285)\ million\\\\=\$140 \ million[/tex]

If interest rates decline by 1%, net income becomes down [tex]\$140\ million \times 1\% = \$14 \ million[/tex]