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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.


Definitions:

Chronic Arterial Symptoms

Symptoms that persist over time indicating poor arterial health, such as pain, cramping, and tiredness in the limbs, often due to restricted blood flow.

Weeping Ulcers

Ulcers that produce a watery fluid or pus, often indicating an infection or underlying health issue.

Diabetes

A chronic condition characterized by high levels of sugar in the blood due to the body's inability to produce or properly use insulin.

Elevational Pallor

A condition where there is paleness of the skin when the limb is raised, often indicative of arterial insufficiency.

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