Loyola Bank classifies its assets and liabilities and the period (maturity buckets)within which they are subject to repricing as on March 31,2015 as follows: $\begin{array} { l c c }
\text { (dollars in millions) } & \text { Interest-sensitive } & \text { Interest-sensitive } \
\text { Maturity buckets } & \text { assets } & \text { liabilities } \
\text { One week } & \$ 50 & \$ 45 \
8 \text { to 25 days } & 75 & 70 \
25 \text { to } 40 \text { days } & 60 & 75 \
40 \text { to } 60 \text { days } & 70 & 80 \
60 \text { to } 90 \text { days } & 80 & 70 \
90 \text { to } 180 \text { days } & 180 & 160 \
180 \text { to } 365 \text { days } & 210 & 190
\end{array}$
Silvershine bank has $200 million in earning assets and $280 million in liabilities that are subject to an interest rate change each month over the next six months.If market interest rates suddenly rise by 2 full percentage points,what will be approximate change in the net interest income for the bank?
A)$8.2 million
B)-$8.5 million
C)$8.5 million
D)$9.6 million
E)-$9.6 million

Question

Loyola Bank classifies its assets and liabilities and the period (maturity buckets)within which they are subject to repricing as on March 31,2015 as follows: $\begin{array} { l c c } 
\text { (dollars in millions) } & \text { Interest-sensitive } & \text { Interest-sensitive } \
\text { Maturity buckets } & \text { assets } & \text { liabilities } \
\text { One week } & \$ 50 & \$ 45 \
8 \text { to 25 days } & 75 & 70 \
25 \text { to } 40 \text { days } & 60 & 75 \
40 \text { to } 60 \text { days } & 70 & 80 \
60 \text { to } 90 \text { days } & 80 & 70 \
90 \text { to } 180 \text { days } & 180 & 160 \
180 \text { to } 365 \text { days } & 210 & 190
\end{array}$
Silvershine bank has $200 million in earning assets and $280 million in liabilities that are subject to an interest rate change each month over the next six months.If market interest rates suddenly rise by 2 full percentage points,what will be approximate change in the net interest income for the bank?
A)$8.2 million
B)-$8.5 million
C)$8.5 million
D)$9.6 million
E)-$9.6 million

Quizplus · Accepted Answer

The change in net interest income (NII) due to a 2 percentage point increase in interest rates for Silvershine Bank can be calculated as the difference in interest income and interest expense changes. Interest income change = $200 million * 2% = $4 million. Interest expense change = $280 million * 2% = $5.6 million. Net change in NII = $4 million - $5.6 million = -$1.6 million per month. Over six months, this amounts to -$1.6 million * 6 = -$9.6 million.

Loyola Bank Classifies Its Assets and Liabilities and the Period