Assets ($ Mill) Liabilities & Equity Variable rate loans (rate reset in 6 months
ID: 2700220 • Letter: A
Question
Assets ($ Mill)
Liabilities & Equity
Variable rate loans
(rate reset in 6 months)
$ 800
Long Term Liabilities
Equity
$ 600
$ 300
$ 1,200
Use above given information, what is the cumulative rate sensitive gap?
-$300
-$1,100
$0
None of the above.
Assets ($ Mill)
Liabilities & Equity
Investments under 1 year $ 450 Deposits < 1 year $ 2,000 Loans < 1 year $ 750 Short Term Liabilities $ 300Variable rate loans
(rate reset in 6 months)
$ 800
Long Term Liabilities
Equity
$ 600
$ 300
Fixed Rate Assets > 1 year maturity
$ 1,200
Total $3,200 Total $3,200Explanation / Answer
cumulative rate sensitive gap over a given time period is the difference between the value of assets that mature or reprice during that period and the value of its liabilities that mature or reprice during that period.
SO Assets during Year = Investments under 1 year$450
+ Loans < 1 year $750 = $1200
Liabilities duing year = Deposits < 1 year $2,000 + Short Term Liabilitie $300 = $2300
So The Gap is Asset - Liabilities
= 1200-2300 = -1100