Chapter Seven - University of Nevada, Reno

b. If at the end of year 1 market interest rates have increased 100 basis points (1 percent), what will be the net interest income for the second year? Is the change in NII caused by reinvestment risk or refinancing risk? Interest income $1,000 $10,000 x 0.10 . Interest expense 700 $10,000 x 0.07 . Net interest income (NII) $300 ................
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