If all interest rates decrease by 15 basis points, what is the expected impact on the FI's net interest income? (Hint: Use the repricing model to answer this question.)
A)+$150,000.
B)-$150,000.
C)-$750,000.
D)+$750,000.
E)No change. [Refer to: 8-99]

Question

Quizplus · Accepted Answer

A decrease in interest rates generally leads to an increase in net interest income for financial institutions (FIs) that have a positive gap (more rate-sensitive assets than liabilities). The repricing model suggests that if assets reprice faster or to a greater extent than liabilities in a falling interest rate environment, the FI would benefit from a wider interest margin, hence the increase in net interest income.

If All Interest Rates Decrease by 15 Basis Points, What