If a bank invested $61 million in a two-year asset paying 13 percent interest pe

Question

If a bank invested $61 million in a two-year asset paying 13 percent interest per year and simultaneously issued a $61 million one-year liability paying 11 percent interest per year, what would be the impact on the banks net interest income if, at the end of the first year, all interest rates increased by 1 percentage point?

If a bank invested $61 million in a two-year asset paying 13 percent interest per year and simultaneously issued a $61 million one-year liability paying 11 percent interest per year, what would be the impact on the banks net interest income if, at the end of the first year, all interest rates increased by 1 percentage point?

Explanation / Answer

Initial :

0.13*61 - 0.11*61 = $1.22 million

Now :

0.14*61 - 0.12*61 = $1.22 million

remain same

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