A bank’s balance sheet contains interest-sensitive assets of
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A bank’s balance sheet contains interest-sensitive assets of

1. A bank’s balance sheet contains interest-sensitive assets of `580 million and interest-sensitive liabilities of `875 million. Calculate the income gap

2. The balance sheet of a financial institution has rate-sensitive assets of `40 million and rate-sensitive liabilities of `70 million. Calculate the income gap for the Financial Institution if interest rates rise from 4.5 % to 5.1%. What is the expected change in income?

Hint
Accounts & Finance1). Interest sensitive assets simply refers to financial products whose features and characteristics or their secondary market prices are vulnerable to changes in interest rates. The adjustable-rate mortgage is an example of interest sensitive asset. Banks and their customers both are affected by interest-sensitive assets. ...

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