2. Suppose your company provides a $50,000 three-year loan to the partner at a variable rate....

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2. Suppose your company provides a $50,000 three-year loan to the partner at a variable rate. The initial variable is 12%. The initial funds come from two sources: own savings $25,000 (assuming zero opportunity cost of using own savings) and borrowing from the bank at a cost of 5% (variable rate). a) What is your company's 1-year Gap with the given loan? b) What is your company's Net Interest Income? c) What is your company's Net Interest Margin? d) What would happen to the Net Interest Income for the given level of Gap if the interest rate spread decreases by 1%? Focus 2. Suppose your company provides a $50,000 three-year loan to the partner at a variable rate. The initial variable is 12%. The initial funds come from two sources: own savings $25,000 (assuming zero opportunity cost of using own savings) and borrowing from the bank at a cost of 5% (variable rate). a) What is your company's 1-year Gap with the given loan? b) What is your company's Net Interest Income? c) What is your company's Net Interest Margin? d) What would happen to the Net Interest Income for the given level of Gap if the interest rate spread decreases by 1%? Focus

Answer rating: 100% (QA)

To solve this problem we need to calculate the 1year Gap Net Interest Income and Net Interest Margin ... View the full answer