QUESTION: 1State Bank's balance sheet is listed below. Market yields are in parentheses, and amounts are in millions.AssetsLiabilities and Equity$ 20$ 25020CashFed funds (5.05%)3-month T-bills (5.25%)2-year T-notes (6.50%)8-year T-notes (7.50%)5-year munis (floating rate) (8.20%, repriced@ 6 months)6-month consumer loans (6%)1-year consumer loans (5.8%)5-year car loans (7%)7-month C&l loans (5.8%)2-year C&l loans (floating rate) (5.15%, repriced@ 6 months)15-year variable-rate mortgages (5.8%, repriced@ 6 months)15-year variable-rate mortgages (6.1%, repriced@ year)15-year fixed-rate mortgages (7.85%)30-year variable-rate mortgages (6.3%, repricedO quarter)30-year variable-rate mortgages (6.4%, repriced@ month)30-year fixed-rate mortgages (8.2%)Premises and equipmentTotal assetsDemand depositsSavings accounts (1.5%)MMDAS (4.5%) (no minimumbalance requirement)3-month CDs (4.2%)6-month CDs (4.3%)1-year CDs (4.5%)2-year CDs (5%)4-year CDs (5.5%)5-year CDs (6%)Fed funds (5%)Overnight repos (5%)6 month commercial paper (5.05%)Subordinate notes:3-year fixed rate (6.55%)Subordinated debt:7-year fixed rate (7.25%)Total liabilities15015034010015020012022037550250425300330200225290300350200275200200400100$3,54530022535540020EquityTotal liabilities and equity400$3,945$3,945Notes:Federal funds are overnight borrowings between banks and other entities to maintain theirbank reserves at the Federal Reserve (State Bank). Banks keep reserves at Federal ReserveBanks to meet their reserve requirements and to clear financial transactions.A money market account (MMA) or money market deposit account (MMDA) is a depositaccount that pays interest based on current interest rates in the money markets.Any type of short-term deposit held by a bank pays a variable rate of interest to the customer.These liabilities include money market certificates, savings accounts and the Super NOWaccount.Required:1. What is the repricing gap if the planning period is 30 days? 6 months? 1 year? 2 years? 5 years?2. What is the impact over the next year on net interest income if interest rates on RSAS increase 60basis points and on RSLS increase 40 basis points?3. What are the criticism on Repricing Gap Analysis?4. How can change in value effect be captured in interest rate risk management?Answer:

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State Bank's balance sheet is listed below. Market yields are in parentheses, and amounts are in millions. Assets Liabilities and Equity $ 20 Demand deposits Savings accounts (1.5%) MMDAS (4.5%) (no minimum balance requirement) 3-month CDs (4.2%) 6-month CDs (4.3%) 1-year CDs (4.5%) 2-year CDs (5%) 4-year CDs (5.5%) 5-year CDs (6%) Fed funds (5%) Overnight repos (5%) 6 month commercial paper (5.05%) Subordinate notes: 3-year fixed rate (6.55%) Subordinated debt: 7-year fixed rate (7.25%) Total liabilities $ 250 20 Cash Fed funds (5.05%) 3-month T-bills (5.25%) 2-year T-notes (6.50%) 8-year T-notes (7.50%) 5-year munis (floating rate) (8.20%, repriced @ 6 months) 6-month consumer loans (6%) 1-year consumer loans (5.8%) 5-year car loans (7%) 7-month C&l loans (5.8%) 2-year C&l loans (floating rate) (5.15%, repriced @6 months) 15-year variable-rate mortgages (5.8%, repriced O6 months) 15-year variable-rate mortgages (6.1%, repriced e year) 15-year fixed-rate mortgages (7.85%) 30-year variable-rate mortgages (6.3%, repriced O quarter) 30-year variable-rate mortgages (6.4%, repriced e month) 30-year fixed-rate mortgages (8.2%) Premises and equipment Total assets 150 150 340 100 150 200 120 220 375 50 250 425 300 330 200 225 350 200 290 300 275 200 200 400 100 300 $3,545 225 355 400 20 $3,945 Equity Total liabilities and equity 400 $3,945 Notes: Federal funds are overnight borrowings between banks and other entities to maintain their bank reserves at the Federal Reserve (State Bank). Banks keep reserves at Federal Reserve Banks to meet their reserve requirements and to clear financial transactions. A money market account (MMA) or money market deposit account (MMDA) is a deposit account that pays interest based on current interest rates in the money markets. Any type of short-term deposit held by a bank pays a variable rate of interest to the customer. These liabilities include money market certificates, savings accounts and the Super NOW account. Required: 1. What is the repricing gap if the planning period is 30 days? 6 months? 1 year? 2 years? 5 years? 2. What is the impact over the next year on net interest income if interest rates on RSAS increase 60 basis points and on RSLS increase 40 basis points? 3. What are the criticism on Repricing Gap Analysis? 4. How can change in value effect be captured in interest rate risk management?