Bank 3 Maturities Assets (millions) Liabilities (millions) 1 day +1 day-3mos +3 mos-6 mos +6 mos- 12 mos +1 year- 5 years 11 17 43 52 10 15 90 11 Use the Repricing Model. If interest rates rise by 56 basis points for assets and 142 basis points for liabilities over the next year, then how will impact the interest income of Bank 3 over the next year? O Bank 3 will experience a loss of $1,483,000 O Bank 3 will experience a gain of $679,400 O Bank 3 will experience a loss of $679,400 O Bank 3 will experience a gain of $1,953,400

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.