In: Finance
Consider the following information to answer the
question:
A. $3.20million B.$5.30million C.$1.89million D.$1.35million |
Net interest income refers to the the interest income earned on various assets held after deducting the interest expense being payable on various liabilities.
In the above question , the interest sensitive asset = $35000000 , fixed rate asset = $21000000
So the interest income earned on assets = 10% on rate sensitive asset = 10% *35000000 =$35,00,000
The interest income of fixed interest asset = 9% on fixed rate asset =9% *21000000 = $18,90,000
Now the given liabilities include interest sensitive = $40000000 , fixed interest = $12000000
The interest expense on liabilties which are interest sensitive = 8% * $ 40000000 = $3200000
interest expense on fixed rate liabilities = 7% * $12000000 = $8,40,000
So the net interest income =Total interest income - total interest expense
= ($35,00,000 + $18,90,000) - ($3200000 + $8,40,000)
= $ 13,50,000 = $1.35 million
Thus the net interest income earned at year end is $ 1.35 million.