Question: First National Bank of Barnett currently has the following interest-sensitive assets and liabilities on its balance sheet:
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Rate-Sensitive Assets
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Rate-Sensitive Liabilities (Rs.)
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Call money lending Rs.65
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Interest-bearing deposits Rs.185
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Security holdings Rs.42
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Money-market borrowings Rs.78
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Loans and leases Rs.230
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Answer briefly (for answer to section 2 and 3, please read the section of your text on 'income statement Gap' which was also discussed briefly in class.)
What is the bank's current Rate-sensitive gap?
Suppose its call money carry an interest-rate sensitivity weight of 1.0 while its investments have a rate-sensitivity weight of 1.15 and its loans and leases display a rate-sensitivity weight of 1.35. On the liability side First National's rate-sensitivity weight is 0.79 for interest-bearing deposits and 0.98 for its money-market borrowings. Adjusted for these various interest-rate sensitivity weights, what is the bank's weighted interest-sensitive gap?
Suppose the call money lending interest rate increases or decreases one percentage point.
How will the bank's net interest income be affected given its current balance sheet make up?
How will the bank's net interest income be affected reflecting its weighted balance sheet adjusted for the foregoing rate-sensitivity indexes?