Reference no: EM133115945

Consider the following balance sheet for X Savings (in milllions).

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

1. What Is X's expected net interest income at year end ?
2. What will net interest income be if interest rates rise by 1 percent ?
3. Using the cumulative repricing gap model, what is the expected net interest income for a 1 percent increase in interest rates ?
4. 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% ?