Banque du Langenberg holds $575 million interest producing assets earning a net interest margin (NIM) of 2.50%. The inital net interest income is thus $14.375 million. The bank's President pursues a strategy of holding longer dated, higher risk assets while also increasing leverage and as a result the net interest margin expands by 25 basis points (or 10% on 2.50%) and the | total asset base increases by 20%. What is the new net interest income? Original scenario Net interest margin Total assets (millions) Rise in nim Rise in total assets Original New scenario Scenario Net interest margin 0.00% 0.00% Total assets $0 $0 Rise in nim 0.0% Rise in total assets 0.0% Net interest income $0.000 $0.000

Banque du Langenberg holds $575 million interest producing assets earning a net interest margin (NIM) of 2.50%. The inital net interest income is thus $14.375 million. The bank's President pursues a strategy of holding longer dated, higher risk assets while also increasing leverage and as a result the net interest margin expands by 25 basis points (or 10% on 2.50%) and the | total asset base increases by 20%. What is the new net interest income? Original scenario Net interest margin Total assets (millions) Rise in nim Rise in total assets Original New scenario Scenario Net interest margin 0.00% 0.00% Total assets $0 $0 Rise in nim 0.0% Rise in total assets 0.0% Net interest income $0.000 $0.000

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 9P

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