If a bank invested $ 50 million in a two-year asset paying 10 percent interest per year and simultaneously issued a $ 50 million one-year liability paying 8 percent interest per year, what would be the impact on the bank’s net interest income if, at the end of the first year, all interest rates increased by 1 percentage point?
Answer to relevant QuestionsAssume that a bank has assets located in Germany worth € 150 million earning an average of 8 percent. It also holds € 100 in liabilities and pays an average of 6 percent per year. The current spot rate is € 1.50 for $ ...What are compensating balances? What is the relationship between the amount of compensating balance requirement and the return on the loan to the FI? The following questions are related to the Appendix material.How does ratio analysis help to answer questions about the production, management, and marketing capabilities of a prospective borrower?Industrial Corporation has a net income-to-sales (profit margin) ratio of 0.03, a sales-to-assets (asset utilization) ratio of 1.5, and a debt-to-asset ratio of 0.66. What is Industrial’s return on equity?An FI is planning to give a loan of $ 5,000,000 to a firm in the steel industry. It expects to charge an up-front fee of 0.10 percent and a service fee of 5 basis points. The loan has a maturity of 8 years. The cost of funds ...
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