1. DDR National Bank uses dollar GAP management. The following is the bank's balance sheet...
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1. DDR National Bank uses dollar GAP management. The following is the bank's balance sheet Rate Sensitive Assets (7.5%) Fixed Rate Assets (9.0%) 4,000 2.800 6,800 Rate Sensitive Liabilities (60%) Fixed Rate Liabilities (7 0%) 3,800 3,000 6,800 a. What is the bank's dollar GAP and its GAP Ratio? b. Calculate the bank's pretax profits. C. Recalculate pretax profits assuming a drop in interest rates of 1% (100 basis points) d. Now assume DDR anticipates the fall in interest rates and replaces $300 of RSA with an equal amount of FRA. (Assume equivalent yields as determined in part c.) Recalculate the dollar GAP and the pretax profits
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