1 A given bank has the following interestsensitive assets andliabilit...

1. A given bank has the following interestâ€sensitive assets and liabilities on its balance sheet (in $...

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Finance

1.
A given bank has the following interestâ€sensitive assets andliabilities on its balance sheet (in $ millions). If the interestrate rises by 1.5%, what is the change of profit?
Interest rate sensitive assets Interest rate sensitiveliabilities
Short term securities $150 Deposits $659
Loans $575
2 Based on the answer to the previous question, should the bankbe concerned about a decrease in interestrates?
No. Decrease is favorable to the bank because it has a negativeinterest rate gap.
Yes. Decrease is unfavorable to the bank because it has anegative financing gap.
No. Decrease is favorable to the bank because it has a positivefinancing gap.
Yes. Decrease is favorable to the bank because it has a positivefinancing gap.
3 If a bank wanted to hedge against a change in interest rates,what could it do?
It could be a counterparty in an interest rate swap.
It could purchase interest rate options.
It could open a interest rate futures position.
All of the above.
Only a and c above.

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1 Change in Profit if interest Rates increase by 15 Change in Profit USD millions Assets Short Term Securities 15000 loans 57500 Less Liabilities Deposits 65900 Interest Rate Gap 6600 Increase in Interest Rate 150 Additional Income 6615 099 2 Based on the answer to the previous question should the bank be concerned about a decrease in interest rates Answer Yes Decrease is unfavorable to the bank because See Answer

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1. A given bank has the following interestâ€sensitive assets and liabilities on its balance sheet (in $...