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Question
A bank has $100 million in earning assets, a net interest margin of 5%, and a 1-year cumulative GAP of $10 million. Interest rates are expected to increase by 2%. If the bank does not want net interest income to fall by more than 25% during the next year, how large can the cumulative GAP be to achieve the allowable change in net interest income.a. $2 million
b. $12 million
c. $15 million
d. $50 million
e. $62.5 million
Answer
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