Question: EVE sensitivity to interest rate changes
Discuss the impact each of the following will have, in general, on EVE sensitivity to a change in interest rates. Consider two cases where rates rise sharply and fall sharply.
(a) Bank owns a high percentage of assets in bonds that are callable anytime after 3-months:
(b) Banks pays below-market rates on time deposits and market interest rates move sharply higher:
(c) A large percentage of the bank's assets are in 30-year fixed rate mortgages: