QUESTION 1. Consider the following summarised balance sheet of FSB Bank Ltd: ...
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Finance
QUESTION 1.
Consider the following summarised balance sheet of FSB Bank Ltd:
Assets
Amount
Rate
Liabilities and Equity
Amount
Rate
Rate sensitive
6,000
7%
Rate sensitive
7,000
3%
Fixed rate
4,500
10%
Fixed rate
3,200
5%
Non-earning
2,500
Non-paying liabilities and equity
2,800
Total
13,000
Total
13,000
Unit: Thousand GBP.
Provide detailed definitions of rate-sensitive assets and rate-sensitive liabilities in GAP analysis.
[4 marks]
Discuss the weaknesses of GAP analysis.
[4 marks]
Calculate the banks GAP.
[2 marks]
Calculate the banks Net Interest Income.
[2 marks]
Calculate the banks Net Interest Margin.
[2 marks]
Calculate the change in Net Interest Income and Net Interest Margin if there is a parallel shift in the yield curve of 1 percentage point higher during the year. Comment on your findings using the data and the implications of GAP analysis.
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