Risks

A bank has 200 million in floating-rate loans yielding T-bills plus 2%. The loans are financed with 200 million in fixed rate deposits costing 9%.

 

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A savings association has 200 million of mortgages with a fixed rate of 13%. They are financed with 200 million of CDs with a variable rate of T-bill plus 3%.

 

What risks does the bank and savings association face?