Question

Suppose that you are the manager of a bank that has​ $15 million of​ fixed-rate assets,​ $30 million of​ rate-sensitive assets,​ $25 million of​ fixed-rate liabilities, and​ $20 million of​ rate-sensitive liabilities. Conduct a gap analysisLOADING... for the​ bank, and show what will happen to bank profits if interest rates rise by 5 percentage points.

Answer 1

$0.5 Million

Step-by-step explanation:

The computation of change in profits is shown below:-

Rate-sensitive assets $30 million

Rate-sensitive liabilities $20 million

Gap = $30 million - $20 million

= $30 million - $20 million

= $10 million

x rise in percentage points = 5%

Change in profit = Gap × x rise in percentage points

= $10 × 5%

= $0.5 Million