Normanby Bank has the following information. The bank anticipates that in the next 12 months , interest rates on Rate-Sensitive Assets will increase by 50 basis points, and interest rates on Rate-Sensitive Liabilities will increase by 100 basis points. What will be the expected change in the bank's annual Net Interest Income (NII)?

Question

Normanby Bank has the following information.    The bank anticipates that in the  next 12 months , interest rates on Rate-Sensitive Assets will increase by 50 basis points, and interest rates on Rate-Sensitive Liabilities will increase by 100 basis points. What will be the expected change in the bank's annual Net Interest Income (NII)?

Answer

NII will decrease by $1.5 million.

Answer

NII will increase by $24 million.

Answer

NII will increase by $7.35 million.

Answer

NII will decrease by $1.8 million.

Assets	Amount ($million)	Rate earned per annum	Liabilities and Equity	Amount ($million)	Rate paid per annum
*3-month Treasury notes*	250	5.5%	*6-month certificates of deposit*	550	5%
*6-month personal loans (fixed rate)*	300	6.5%	*2-year term deposits (fixed rate)*	320	6%
*2-year corporate term loans (fixed rate)*	150	8.5%	*30-year subordinated debts (variable rate adjusted quarterly)*	180	7.5%
*30-year mortgage loans (variable rate adjusted monthly)*	550	7%	*Equity*	250
*Premises (non-earning)*	50
Total	1,300		Total	1,300

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Normanby Bank has the following information. The bank anticipates that in th...

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