If rate-sensitive assets equal $500 million and rate-sensitive liabilities equals $400 million, what is the expected change in net interest income if rates increase by 1%?
A) Net interest income will increase by $1 million.
B) Net interest income will fall by $1 million.
C) Net interest income will increase by $10 million.
D) Net interest income will fall by $10 million.
E) Net interest income will be unchanged.

Question

Quizplus · Accepted Answer

The expected change in net interest income is calculated as the difference between rate-sensitive assets and rate-sensitive liabilities, multiplied by the change in interest rates. Here, ($500 million - $400 million) * 1% = $100 million * 1% = $1 million increase in net interest income.

If Rate-Sensitive Assets Equal $500 Million and Rate-Sensitive Liabilities Equals