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2. TD Bank has the following assets and liabilities as of year-end. All assets and liabilities are currently priced at par and pay interest annually Annual Assets Amount Annual Liabilities Amount (S millions) Rate $ 60 (S millions) $ 40 Rate 2-year loans 3-year loans 3-year GIC 5-year term deposit Equity Total 8% 7% $ 60 8% $ 30 6% 10 Total $100 $100 a. What is the change in the value of its assets if all interest rates decrease by 1 percent? b. What is the change in the value of its liabilities if all interest rates decrease by 1 percent? c. What is the effect on the value of the FI's equity if interest rates decrease by 1 percent? 5. The balance sheet of MassMutual Insurance shows the following fixed and rate sensitive assets and liabilities. Liabilities Assets Rate Amount Rate Amount $35,000,000 $40,000,000 Rate 10% Rate 8% Sensitive Sensitive $21,000,000 Fixed Rate Fixed Rate $12,000,000 7% 9% Non-earning Equity 4,000,000 8,000,000 a. What is the repricing gap for the FI? b. What will be the Fl's net interest income at year-end if interest rates do not change? c. Suppose short-term interest rates increase by 1 percent. Calculate the change in net interest income after the interest rate increase. 2. TD Bank has the following assets and liabilities as of year-end. All assets and liabilities are currently priced at par and pay interest annually Annual Assets Amount Annual Liabilities Amount (S millions) Rate $ 60 (S millions) $ 40 Rate 2-year loans 3-year loans 3-year GIC 5-year term deposit Equity Total 8% 7% $ 60 8% $ 30 6% 10 Total $100 $100 a. What is the change in the value of its assets if all interest rates decrease by 1 percent? b. What is the change in the value of its liabilities if all interest rates decrease by 1 percent? c. What is the effect on the value of the FI's equity if interest rates decrease by 1 percent? 5. The balance sheet of MassMutual Insurance shows the following fixed and rate sensitive assets and liabilities. Liabilities Assets Rate Amount Rate Amount $35,000,000 $40,000,000 Rate 10% Rate 8% Sensitive Sensitive $21,000,000 Fixed Rate Fixed Rate $12,000,000 7% 9% Non-earning Equity 4,000,000 8,000,000 a. What is the repricing gap for the FI? b. What will be the Fl's net interest income at year-end if interest rates do not change? c. Suppose short-term interest rates increase by 1 percent. Calculate the change in net interest income after the interest rate increase

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