Consider the following balance sheet for Watchover Savings Incorporated (in millions): Assets Floating-rate mortgages (currently 10% per annum) 30-year fixed-rate loans (currently 7% per annue) a Net interest income b. Net interest income Total a. What is Watchover's expected net interest income at year-end? (Enter your answer in millions rounded to 1 decimal place. (e.g., 32.1)) b. What will be the net interest income at year-end if interest rates rise by 2 percent? (Enter your answer in millions rounded to 1 decimal place. (e.g.. 32.1)) c. Using the one-year cumulative repricing gap model, what is the change in the expected net interest income for a 2 percent increase in interest rates? (Negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 1 decimal place. (e.g.. 32.1)) Change in net interest income S Liabilities and Equity S60 Now deposits (currently 6% per annum) 5-year time deposits (currently 6% per annum) Equity 90 $ 150 Total 4.5 milion million million # $ 105 25 20 $ 150 Next >
Consider the following balance sheet for Watchover Savings Incorporated (in millions): Assets Floating-rate mortgages (currently 10% per annum) 30-year fixed-rate loans (currently 7% per annue) a Net interest income b. Net interest income Total a. What is Watchover's expected net interest income at year-end? (Enter your answer in millions rounded to 1 decimal place. (e.g., 32.1)) b. What will be the net interest income at year-end if interest rates rise by 2 percent? (Enter your answer in millions rounded to 1 decimal place. (e.g.. 32.1)) c. Using the one-year cumulative repricing gap model, what is the change in the expected net interest income for a 2 percent increase in interest rates? (Negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 1 decimal place. (e.g.. 32.1)) Change in net interest income S Liabilities and Equity S60 Now deposits (currently 6% per annum) 5-year time deposits (currently 6% per annum) Equity 90 $ 150 Total 4.5 milion million million # $ 105 25 20 $ 150 Next >
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter27: Investment, The Capital Market, And The Wealth Of Nations
Section: Chapter Questions
Problem 9CQ
Related questions
Question
Qd 150.
Transcribed Image Text:Consider the following balance sheet for Watchover Savings Incorporated (in millions):
Assets
Floating-rate mortgages (currently 10% per annum)
30-year fixed-rate loans (currently 7% per annue)
a Net interest income
b. Net interest income
Total
a. What is Watchover's expected net interest income at year-end? (Enter your answer in millions rounded to 1 decimal place. (e.g.,
32.1))
b. What will be the net interest income at year-end if interest rates rise by 2 percent? (Enter your answer in millions rounded to 1
decimal place. (e.g.. 32.1))
c. Using the one-year cumulative repricing gap model, what is the change in the expected net interest income for a 2 percent increase
in interest rates? (Negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 1 decimal place.
(e.g.. 32.1))
Change in net interest income
S
Liabilities and Equity
S60 Now deposits (currently 6% per annum)
5-year time deposits (currently 6% per annum)
Equity
90
$ 150
Total
4.5 milion
million
million
#
$ 105
25
20
$ 150
Next >
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