Question: Consider the following balance sheet for Watchovia Bank (in millions):
a. What is Watch ovia's expected net interest income at year-end?
b. What will net interest income be at year-end if interest rates rise by 2 percent?
c. Using the one-year cumulative repricing gap model, what is the expected net interest income for a 2 percent increase in interest rates?
d. What will net interest income be at year-end if interest rates on RSAs increase by 2 percent but interest rates on RSLs increase by 1 percent? Is it reasonable for changes in interest rates on RSAs and RSLs to differ? Why?