In the example below, we will use year-end assets. Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment. NIM=Profit/Interest revenue Bank A Loan 7% $90 G-Bond 5% ? Deposits 5% $70 Equity $40 Total Assets $? Total Equity and Deposit $110 The amount of G-bond is $50 $70 $20 $40 $80 $60 $30 $10
In the example below, we will use year-end assets. Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment. NIM=Profit/Interest revenue Bank A Loan 7% $90 G-Bond 5% ? Deposits 5% $70 Equity $40 Total Assets $? Total Equity and Deposit $110 The amount of G-bond is $50 $70 $20 $40 $80 $60 $30 $10
Chapter11: The Cost Of Capital
Section: Chapter Questions
Problem 12PROB
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Question
- In the example below, we will use year-end assets.
Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment.
NIM=Profit/Interest revenue
Bank A |
|
Loan 7% $90 G-Bond 5% ? |
Deposits 5% $70 Equity $40 |
Total Assets $? |
Total Equity and Deposit $110 |
The amount of G-bond is
$50 |
||
$70 |
||
$20 |
||
$40 |
||
$80 |
||
$60 |
||
$30 |
||
$10 |
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