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To determine the expected change in income resulting from an interest rate increase, we first need to understand the concept of rate-sensitive assets and liabilities. Rate-sensitive assets are those that will earn interest at variable rates and adjust quickly to changes in interest rates, while rate-sensitive liabilities will incur interest expenses that are also affected by interest rate changes.

In this scenario, the bank has rate-sensitive assets totaling $900 million and rate-sensitive liabilities of $700 million. When interest rates rise by 0.5%, the interest income generated from the assets will increase while the interest expense on the liabilities will also increase.

The increase in income from the assets can be calculated as follows:

- Increase in income from assets = $900 million * 0.5% = $4.5 million.

Conversely, the increase in expenses from the liabilities is:

- Increase in expenses from liabilities = $700 million * 0.5% = $3.5 million.

Next, we look at the net interest income, which is the difference between the interest earned on assets and the interest paid on liabilities:

- Change in net interest income = Increase in income from assets - Increase in expenses from liabilities

- Change in net interest income = $4.5 million - $