A Bank Has an Interest Rate Spread of 150 Basis

question 33

Multiple Choice

A bank has an interest rate spread of 150 basis points on $30 million in earning assets funded by interest bearing liabilities. However, the interest rate on its assets is fixed and the interest rate on its liabilities is variable. If all interest rates go up 50 basis points, the bank's new pre-tax net interest income will be __________.

• A) $600,000
• B) $450,000
• C) $300,000
• D) $250,000
• E) $175,000 (1.50% -0.50%) x $30 million

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