Please explain each step in detail b) Calculate the NII and NIM for the current interest rate environment and for a +2% and a -2% parallel shift in interest rates. Calculatethe Earnings-at-Risk. (NB: The deposit rate cannot go below 0%.)No rate changeInterest IncomeLoans -fixed rateBonds-fixed rateBonds-floating rateTotalInterest CostsDeposits -fixed rateDeposits -floating rateNIBLSCapitalTotalNet interest income (NII)Net interest margin (NIM)Earnings-at-Risk (EaR)132.251.0516.34.50.34.811.52.09%-2% parallel shift132.25-0.1515.14.504.510.61.927%7.826%+2% parallel shift132.252.2517.54.52.77.210.31.872%10.434%

To calculate the Net Interest Income (NII) and Net Interest Margin (NIM) for the current interest…

b) Calculate the NII and NIM for the current interest rate environment and for a + 2% and a -2% parallel shift in interest rates. Calculate the Earnings-at-Risk. (NB: The deposit rate cannot go below 0%.)

b) Calculate the NII and NIM for the current interest rate environment and for a + 2% and a -2% parallel shift in interest rates. Calculate the Earnings-at-Risk. (NB: The deposit rate cannot go below 0%.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Please explain each step in detail

b) Calculate the NII and NIM for the current interest rate environment and for a +2% and a -2% parallel shift in interest rates. Calculate
the Earnings-at-Risk. (NB: The deposit rate cannot go below 0%.)
No rate change
Interest Income
Loans -
fixed rate
Bonds-
fixed rate
Bonds-
floating rate
Total
Interest Costs
Deposits -
fixed rate
Deposits -
floating rate
NIBLS
Capital
Total
Net interest income (NII)
Net interest margin (NIM)
Earnings-at-Risk (EaR)
13
2.25
1.05
16.3
4.5
0.3
4.8
11.5
2.09%
-2% parallel shift
13
2.25
-0.15
15.1
4.5
0
4.5
10.6
1.927%
7.826%
+2% parallel shift
13
2.25
2.25
17.5
4.5
2.7
7.2
10.3
1.872%
10.434%

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