Consider the following Balance Sheet for Cutting Edge Commercial Bank(CECB) (in millions) ASSETS LIABILITIES Floating rate mortgages 120 Demand deposits 110 (currently 14% annually) (currently 5% annually) 30 years fixed rate loans 1 year CD 50 (currently 9% annually) 80 (currently 8% annually) Equity 40 200 200 1. What is CECB expected net interest income (NII) at year-end? 2. What is CECB expected net interest income at year end if interest rates fell by seven percent (7%). 3. What is CECB expected net interest income at year end if interest rates grew by 300 basis points on assets, but decline by 2% on liabilities.
Consider the following Balance Sheet for Cutting Edge Commercial Bank(CECB) (in millions) ASSETS LIABILITIES Floating rate mortgages 120 Demand deposits 110 (currently 14% annually) (currently 5% annually) 30 years fixed rate loans 1 year CD 50 (currently 9% annually) 80 (currently 8% annually) Equity 40 200 200 1. What is CECB expected net interest income (NII) at year-end? 2. What is CECB expected net interest income at year end if interest rates fell by seven percent (7%). 3. What is CECB expected net interest income at year end if interest rates grew by 300 basis points on assets, but decline by 2% on liabilities.
Chapter4: Time Value Of Money
Section4.17: Amortized Loans
Problem 1ST
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100%
- Consider the following
Balance Sheet for Cutting Edge Commercial Bank(CECB) (in millions)
ASSETS |
|
|
LIABILITIES |
|
Floating rate mortgages |
120 |
|
Demand deposits |
110 |
(currently 14% annually) |
|
|
(currently 5% annually) |
|
30 years fixed rate loans |
|
|
1 year CD |
50 |
(currently 9% annually) |
80 |
|
(currently 8% annually) |
|
|
|
|
Equity |
40 |
|
|
|
|
|
|
200 |
|
|
200 |
1. What is CECB expected net interest income (NII) at year-end?
2. What is CECB expected net interest income at year end if interest rates fell by seven percent (7%).
3. What is CECB expected net interest income at year end if interest rates grew by 300 basis points on assets, but decline by 2% on liabilities.
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