Consider the following repricing buckets and gaps: $$\begin{array} { | l | r | r | r | }
\hline \text { Repricing bucket } &{ \text { Assets } } & { \text { Liabilities } } & { \text { Gaps } } \
\hline \text { 1 day } & \$ 50000 & \$ 120000 & - \$ 70000 \
\hline \text { 1 day to 3 months } & \$ 100000 & \$ 70000 & \$ 30000 \
\hline \text { 3 to 6 months } & \$ 100000 & \$ 100000 & \$ 0 \
\hline \text { 6 to 12 months } & \$ 250000 & \$ 80000 & \$ 170000 \
\hline 1 \text { to 5 years } & \$ 75000 & \$ 130000 & - \$ 55000 \
\hline \text { Over 5 years } & \$ 25000 & \$ 100000 & - \$ 75000 \
\hline
\end{array}$$ What is the annualised change in the bank's future net interest income if the average rate change for assets and liabilities that can be repriced within one year is an increase of 100 basis points?
A)$17 000
B)-$17 000
C)$13 000
D)-$13 000

Question

Consider the following repricing buckets and gaps: $$\begin{array} { | l | r | r | r | } 
\hline \text { Repricing bucket } &{ \text { Assets } } & { \text { Liabilities } } &  { \text { Gaps } } \
\hline \text { 1 day } & \$ 50000 & \$ 120000 & - \$ 70000 \
\hline \text { 1 day to 3 months } & \$ 100000 & \$ 70000 & \$ 30000 \
\hline \text { 3 to 6 months } & \$ 100000 & \$ 100000 & \$ 0 \
\hline \text { 6 to 12 months } & \$ 250000 & \$ 80000 & \$ 170000 \
\hline 1 \text { to 5 years } & \$ 75000 & \$ 130000 & - \$ 55000 \
\hline \text { Over 5 years } & \$ 25000 & \$ 100000 & - \$ 75000 \
\hline
\end{array}$$ What is the annualised change in the bank's future net interest income if the average rate change for assets and liabilities that can be repriced within one year is an increase of 100 basis points?
A)$17 000
B)-$17 000
C)$13 000
D)-$13 000

Quizplus · Accepted Answer

The annualised change in the bank's future net interest income can be calculated by applying the average rate change to the cumulative gap for assets and liabilities that can be repriced within one year. The cumulative gap within one year is the sum of the gaps in the "1 day", "1 day to 3 months", and "3 to 6 months" buckets, which is -\$70,000 + \$30,000 + \$0 = -\$40,000. Since the gap is negative, an increase in interest rates will decrease net interest income. The change in net interest income is -\$40,000 * 1% (or 100 basis points) = -\$400. However, there seems to be a misunderstanding in the calculation or the options provided, as none of the options directly match the calculated outcome based on the provided explanation. The correct approach involves calculating the impact of the interest rate change on the net interest income considering the gaps, but the options given do not align with the standard calculation.

Consider the Following Repricing Buckets and Gaps What Is the Annualised Change in the Bank's Future Net