(Answered) Problem - consider the following balance sheet for x

Accounting

Problem - Consider the following balance sheet for X Savings (in millions).

Assets

Floating rate mortgages $ 40

(Currently 9% annuall7) 30-year fixed rate loans

(Currently 6% annuall7) 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

a. What Is X's expected net interest income at year end?

b. What will net interest income be if interest rates rise by 1 percent?

c. Using the cumulative repricing gap model, what is the expected net interest income for a 1 percent increase in interest rates?

d. 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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