Consider the following Balance Sheet for Forward Thinking Commercial Bank(FTCB) (in millions) ASSETS LIABILITIES Floating rate mortgages 250 Demand deposits 300 (currently 14% annually) (currently 5% annually) 30 years fixed rate loans 1 year CD 50 (currently 9% annually) 120 (currently 8% annually) Equity 20 370 370 a. What is FTCB expected net interest income (NII) at year end? b. What is FTCB expected net interest income at year end if interest rates fell by seven percent (7%). c. What is FTCB 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 Forward Thinking Commercial Bank(FTCB) (in millions) ASSETS LIABILITIES Floating rate mortgages 250 Demand deposits 300 (currently 14% annually) (currently 5% annually) 30 years fixed rate loans 1 year CD 50 (currently 9% annually) 120 (currently 8% annually) Equity 20 370 370 a. What is FTCB expected net interest income (NII) at year end? b. What is FTCB expected net interest income at year end if interest rates fell by seven percent (7%). c. What is FTCB expected net interest income at year end if interest rates grew by 300 basis points on assets, but decline by 2% on liabilities.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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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 Forward Thinking CommercialBank(FTCB) (in millions) Assets Liabilities Floating rate mortgages (currently 14% annually) 250 Demand deposits (currently 5% annually) 300 30 years fixed rate loans 120 1 year CD (currently 8% annually) 50 Equity 20 370 370 a. What is FTCB expected net interest income (NII) at year end? b. What is FTCB expected net interest income at year end if interest rates fell by seven percent (7%). c. What is FTCB 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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ASSETS		LIABILITIES
Floating rate mortgages	250	Demand deposits	300
(currently 14% annually)		(currently 5% annually)
30 years fixed rate loans		1 year CD	50
(currently 9% annually)	120	(currently 8% annually)
		Equity	20

	370		370