Q 2a The figure below shows the federal funds rate for the period 2012 to 2022. The federal funds rate

is the interest rate that banks charge each other to borrow or lend excess reserves

overnight.

As can be seen, the rate is rapidly rising. What impact does this have on commercial banks' net

interest margin? Be specific by considering the banks' assets, liabilities, and equity.

Q 2b What is a maturity bucket in the repricing model? Why is the length of time selected for

repricing assets and liabilities important when using the repricing model? How does this impact

runoff?