A bank has $125 million in three (3) year loans earning afixed rate equal to 6.5

A bank has $125 million in three (3) year loans earning afixed rate equal to 6.5%. The assets are funded by $125 million inliabilities that have a cost of 4.5% and a maturity of 1 year. Ifinterest rates are projected to fall 100 basis points by next yearby how much will the banks profits and NIM change in year 2? Doesthis bank face refinancing risk or reinvestment risk?Explain.