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Calculate the bank''s cgap and gap ratio

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Reference no: EM132769510

Assets Avg. Rate Liabilities/Equity Avg. Rate

Rate sensitive $550,000 7.75% Rate sensitive $375,000 6.25%

Fixed rate 775,000 8,75% Fixed rate 805,000 7.50

Nonearning 265,000 Nonpaying 390,000

Total $1,570,000 $1,570,000

Suppose interest rates rise such that the average yield on rate-sensitive assets increases by 45 basis points and the average yield on rate-sensitive liabilities increases by 35 basis points.

(a)Calculate the bank's CGAP and gap ratio.

(b) Assuming the bank does not change the composition of its balance sheet, calculate the resulting change in the bank's interest income, interest expense, and net interest income.

(c) Explain how the CGAP and spread effects influenced the change in net interest income

Reference no: EM132769510

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