A Bank Has $100 Million in Earning Assets, a Net

question 45

Multiple Choice

A bank has $100 million in earning assets, a net interest margin of 5%, and a 1-year cumulative GAP of $10 million.Interest rates are expected to increase by 2%.If the bank does not want net interest income to fall by more than 25% during the next year, how large can the cumulative GAP be to achieve the allowable change in net interest income.

• A)$2 million
• B)$12 million
• C)$15 million
• D)$50 million
• E)$62.5 million

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