8-45 An FI finances a $250,000 2-year fixed-rate loan with a $200,000 1-year fixed-rate CD.Use the repricing model to determine (a)the FI's repricing (or funding)gap using a 1-year maturity bucket,and (b)the impact of a 100 basis point (0.01)decrease in interest rates on the FI's annual net interest income?
A)$0; $0.
B)-$200,000; +$2,000
C)-$200,000; -$2,000.
D)+$50,000; ?$500.
E)-$200,000; ?$1,000.

Question

Quizplus · Accepted Answer

The repricing gap is calculated as the difference between rate-sensitive assets and rate-sensitive liabilities within the 1-year maturity bucket. Here, the loan is not rate-sensitive within 1 year, but the CD is, resulting in a gap of -$200,000. A 100 basis point decrease in interest rates would increase the FI's net interest income by $2,000, as the cost of the CD decreases.

8-45 an FI Finances a $250,000 2-Year Fixed-Rate Loan with a $200,000