Repricing model because fewer calculations are required

Assignment Help Financial Management

Reference no: EM131943010

1. An FI finances a $250,000 2-year fixed-rate loan with a $200,000 1-year fixed-rate CD. Use the repricing model to determine (a) the FI's repricing (or funding) gap using a 1-year maturity bucket, and (b) the impact of a 100 basis point (0.01) decrease in interest rates on the FI's annual net interest income?

$0; $0.

-$200,000; +$2,000.

-$200,000; -$2,000.

+$50,000; -$500.

-$200,000; -$1,000.

2. An interest rate increase

benefits the FI by increasing the market value of the FI's liabilities.

harms the FI by increasing the market value of the FI's liabilities.

harms the FI by decreasing the market value of the FI's liabilities.

benefits the FI by decreasing the market value of the FI's liabilities.

benefits the FI by decreasing the market value of the FI's assets.

3. Defining buckets of time over wider intervals creates greater accuracy in the use of the repricing model because fewer calculations are required.

True

False

Reference no: EM131943010

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