Nancy is analyzing a bank’s income exposure to interest rate risk using the repricing model. She collected the information below on the bank’s balance sheet. Assets                                                                                            Liabilities and Equity      Cash (no interest payments): 315                                             Equity: 378 Fed Funds (overnight): 158                                                      Demand Deposits: 977 3-Month Treasury Bills: 125                                                     Savings Accounts: 630 2-Year Treasury Notes: 190                                                      3-Month CDs: 158 6-Month Consumer Loans: 568                                               6-Month CDs: 315 3-Year Business Loans: 282                                                      2-Year CDs   315 30-Year Fixed-Rate Mortgages: 1512                                     Fed Funds (overnight): 62 Total Assets: 3150                                                                        6-Month Commercial Paper: 315                                                                                                          Total Liabilities and Equity: 3150 When implementing her analysis, she also decided to make the assumptions below. A 1 percentage point increase in the market interest rate leads to a 0.4 percentage point increase in the rate paid on savings deposits. A 1 percentage point increase in the market rate leads to a 0.7 percentage point increase in the rate paid on new time deposits. A 1 percentage point increase in the market rate leads to a 1 percentage point increase in the rate paid on all other rate-sensitive liabilities (RSLs) and rate-sensitive assets (RSAs). Following this approach, determine how a 0.5 percentage point increase in the market interest rate affects the net interest income (NII) over a one-year time horizon.单项选择题

A

-1.6

B

-3.1

C

1.0

D

0.0

E

-0.5

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