Interest-rate sensitive assets

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For every $100 in assets, a bank has $40 in interest-rate sensitive assets, and the other $60 in non-interest-rate sensitive assets. The same bank has $50 for every $100 in liabilities in interest-rate sensitive liabilities, the other $50 are in liabilities that are not interest-rate sensitive. If the interest rate on assets increases from 5 to 6 percent, and the interest rate on liabilities increases from 3 to 4 percent, analyze the impact on the bank’s profits per $100 of assets. Show your work.

Reference no: EM13796742

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