Sample test questions for Test 2, FINA 465
Chapter 8
1)
If interest rates decrease 50 basis points for an FI that has a gap of $5 million, what is the
expected change in net interest income?
$5M * (-.005) =
-$25,000
2)
If interest rates decrease 40 basis points (0.40 percent) for an FI that has a cumulative gap
of -$25 million, what is the expected change in net interest income?
-$25M *(-.004) = +$100,000
The next 2 questions refer to the following information.
Assets
Rate
Liabilities
Rate
Rate Sensitive
Rate Sensitive
$35,000,000
10 percent
$40,000,000
8 percent
Fixed Rate
Fixed Rate
$21,000,000
9 percent
$12,000,000
7 percent
Non-earning
Equity
$4,000,000
$8,000,000
3)
What is the repricing gap for the FI?
$35,000,000 - $40,000,000 = -$5,000,000
4)
Suppose short-term interest rates increase by 1 percent. Calculate the change in net
interest income after the interest rate increase.
-$5M*.01= -$50,000