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-What Is the Impact on Net Interest Income in Year

Question 84

Multiple Choice

 Face Value  Runoff <1 year  Face Value  Runoff <1 year  3-mo. T-Bills $60 m Demand Dep. $180 m10 percent  2-yr Bonds $60 m5 percent  Equity $20 m 5-yr Bonds $80 m10 percent \begin{array} { | l | c | l | l | c | c | } \hline & \text { Face Value } & \begin{array} { l } \text { Runoff } \\< \mathbf { 1 } \text { year }\end{array} & & \text { Face Value } & \begin{array} { c } \text { Runoff } \\< \mathbf { 1 } \text { year }\end{array} \\\hline \text { 3-mo. T-Bills } & \$ 60 \mathrm {~m} & & \text { Demand Dep. } & \$ 180 \mathrm {~m} & 10 \text { percent } \\\hline \text { 2-yr Bonds } & \$ 60 \mathrm {~m} & 5 \text { percent } & \text { Equity } & \$ 20 \mathrm {~m} & \\\hline \text { 5-yr Bonds } & \$ 80 \mathrm {~m} & 10 \text { percent } & & & \\\hline\end{array}
-What is the impact on net interest income in year two if interest rates increase by 50 basis points at the end of year one? Ignore runoffs.


A) +$0.210 million.
B) +$0.300 million.
C) -$0.300 million.
D) -$0.210 million.
E) +$0.600 million.

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