8-83 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.

Question

Quizplus · Accepted Answer

If interest rates increase by 50 basis points, the interest rate spread decreases, which results in a decrease in net interest income. Therefore, the impact on net interest income in year two will be negative (-$0.300 million).

8-83 What Is the Impact on Net Interest Income in Year