Consider the following balance sheet for MMC (in millions of dollars)
Assets Liabilities
1. Cash and due from $ 6.25 1.Equity capital(Fixed) $ 25.00
2. Short term consumer loans 62.50 2.Demand deposits 50.00 (one year maturity)
3. Long term consumer loans
(two year maturity) 31.25 3.Passbook savings 37.50
4. Three-month T-bills 37.50 4.Three-month CDs 50.00
5. Six-month T-notes 43.75 5. Three month bankers acceptances 25.00
6. Three year T-bonds 75.00 6.Six month commercial paper 75.00
7. 10 year, fixed rate mortgages 25.00 7. One year time deposit 25.00 8 30 year floating rate mortgages 50.00 8 Two year time deposit 50.00 9 Premises 6.25 Total 337.50 337.50
a) Calculate the value of MMC's rate-sensitive assets, rate sensitive liabilities and repricing gap over the next year.
b) Calculate the expected change in the net interest income for the bank if interest rates rise by 1 percent on both rate-sensitive assets (RSA's) and rate-sensitive liabilities (RSL's) If interest rates fall by 1 percent on both RSAs and RSL's.
c) Calculate the expected change in the net interest income for the bank if interest rates rise by 1.2 percent on RSA's and by 1 percent on RSL's. If interest rates fall by 1.2 percent on RSA's and by 1 percent on RSL's.