Financial Management of Financial Institutions HW

1. CHAPTER 8 – Using the information from Question 1 and assuming your bank is planning for the 2-year or less maturity window(s), what is the cumulative repricing gap? Explain interest rate risk. Is your bank short-funded or long-funded? Explain why. To what type of type of interest rate risk is the bank exposed (reinvestment or refinance) in the 2-year or less maturity window(s)? Explain why using the chart below.

2. CHAPTER 8 – Using the information from Question 1 and “Total Assets” (“Total Assets”, not “Total Earning Assets” for the denominator) from Page 4 of your UPBR, what is the CGAP Ratio for the 2-year or less maturity window(s)? Interpret the result.

RowCGAP∆ in Rates∆ in NII∆ in Int Rev∆ in Int Exp

1Positive↑↑↑>↑

2Positive↓↓↓>↓

3Negative↑↓↑<↑

4Negative↓↑↓<↓