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In: Finance
Problem 22-3 (LG 22-1) Consider the following balance sheet for Watchover Savings, Inc. (in millions): Assets...
Problem 22-3 (LG 22-1)
| Consider the following balance sheet for Watchover Savings, Inc. (in millions): |
| Assets | Liabilities and Equity | ||||
| Floating-rate mortgages (currently 11% p.a.) |
$ | 62 | Now deposits (currently 7% p.a.) |
$ | 106 |
| 30-year fixed-rate loans (currently 8% p.a.) |
91 | 5-year time deposits (currently 7% p.a.) |
26 | ||
| Equity | 21 | ||||
| Total | $ | 153 | Total | $ | 153 |
| a. |
What is Watchover’s expected net interest income at year-end? (Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16)) |
| Net interest income | $ million |
| b. |
What will be the net interest income at year-end if interest rates rise by 1 percent? (Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16)) |
| Net interest income | $ million |
| c. |
Using the one-year cumulative repricing gap model, what is the change in the expected net interest income for a 1 percent increase in interest rates? (Negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16)) |
| Net interest income | $ million |
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jeff jeffy answered 11 months agoRelated Solutions
Consider the following balance sheet for Watchover Savings, Inc. (in millions): Assets Liabilities and Equity Floating-rate...
Consider the following balance
sheet for Watchover Savings, Inc. (in millions):
Assets
Liabilities and Equity
Floating-rate
mortgages
(currently 12% p.a.)
$
86
Now deposits
(currently 8% p.a.)
$
118
30-year fixed-rate
loans
(currently 9% p.a.)
103
5-year time
deposits
(currently 8% p.a.)
26
Equity
45
Total
$
189
Total
$
189
a.
What is Watchover’s expected net interest income at year-end?
(Enter your answer in millions rounded to 2 decimal places.
(e.g., 32.16))
Net interest
income
$ million
b.
What...
Consider the following balance sheet for Watchover Savings Inc. (in millions): Assets Liabilities and Equity Floating-rate...
Consider the following balance sheet for Watchover Savings
Inc. (in millions):
Assets Liabilities and Equity
Floating-rate mortgages (currently 12% p.a.) $ 70 Now deposits
(currently 8% p.a.) $ 110
30-year fixed-rate loans (currently 9% p.a.) 95 5-year time
deposits (currently 8% p.a.) 21
Equity 34
Total $ 165 Total $ 165
a. What is Watchover’s expected net interest income at
year-end? (Enter your answer in millions rounded to 2 decimal
places. (e.g., 32.16))
b. What will be the net interest...
Consider the following balance sheet for WatchoverU Savings Inc. ($ in millions): Assets Liabilities Floating-rate mortgages...
Consider the following balance sheet for WatchoverU Savings Inc.
($ in millions):
Assets
Liabilities
Floating-rate mortgages (currently 10% annually)
$
60
NOW accounts (currently 6% annually)
$
80
30-year fixed-rate loans (currently 7% annually)
60
Time deposits (currently 6% annually)
24
Equity
16
Total
$
120
$
120
a. What is WatchoverU’s expected net interest income at
year-end?
b. What will be the net interest income at
year-end if interest rates rise by 2 percent?
Consider the following balance sheet for ABC Inc( in millions) Assets Liabilities and Equity Floating Rate...
Consider the following balance sheet for ABC Inc( in
millions)
Assets
Liabilities and Equity
Floating Rate loans ( currently 6% annually) = $80
Demand Deposits(currently at 1% annually) = $30
20 year fixed rate loans ( currently 5% annually) = $20
Time Deposits( currently at 6% annually) = $60
Total Assets = $100
Equity = $10
Total Liabilities and Equity = $100
a) What is ABC's expected net interest income at year end?
b) What will be the net interest...
3. Megalopolis Bank has the following balance sheet and income statement. Balance Sheet (in millions) Assets...
3. Megalopolis Bank has the following balance sheet and income
statement.
Balance Sheet (in millions)
Assets | Liabilities and Equity
Cash and due from banks $ 9,000 | Demand deposits $ 19,000
Investment securities 23,000 | NOW accounts 89,000
Repurchase agreements 42,000 | Retail CDs 28,000
Loans 90,000 | Debentures 19,000
Fixed assets 15,000 | Total liabilities $155,000
Other assets 4,000 | Common stock 12,000
Total assets $183,000 | Paid-in capital 4,000
| Retained earnings 12,000
| Total liabilities and...
Consider the following balance sheet (in $millions): Assets consisting of Cash of $2 and Loans of...
Consider the following balance sheet (in $millions): Assets
consisting of Cash of $2 and Loans of $10; Liabilities consisting
of Deposits of $8, Debt of $2 and Equity of $2 (Total Assets of
$12). The average interest earned on the loans is 7% and the
average cost of deposits is 6%. Rising interest rates are expected
to reduce the deposits by $3 million. Borrowing more debt will cost
the bank 6.5% in the short term.
A. What will be the...
Consider the following balance sheet (in millions) for an FI: Assets Liabilities Duration = 13 years...
Consider the following balance sheet (in millions) for an
FI:
Assets
Liabilities
Duration = 13 years
$
970
Duration = 5 years
$
900
Equity
70
a. What is the FI’s duration gap? (Do not
round intermediate calculations. Round your answer to 2 decimal
places. (e.g., 32.16))
b. What is the FI’s interest rate risk
exposure?
c. How can the FI use futures and forward
contracts to create a macrohedge?
d. What is the impact on the FI’s equity value...
Consider the following balance sheet (in millions) for an FI: Assets Liabilities Duration = 10 years...
Consider the following balance sheet (in millions) for an
FI:
Assets Liabilities
Duration = 10 years $950 Duration = 2 years $860
Equity 90
a)What is the FI's duration gap?
b)What is the FI's interest rate risk exposure?
c)How can the FI use futures and forward contracts to put on a
macrohedge?
d) What is the impact on the FI's equity value if the relative
change in interest rates is an increase of 1 percent? That is,
DR/(1+R) =...
Hillside, Inc. BALANCE SHEET INCOME STATEMENT ($ in millions) ($ in millions) ASSETS LIABILITIES Revenue ...
Hillside,
Inc.
BALANCE SHEET
INCOME STATEMENT
($ in millions)
($ in millions)
ASSETS
LIABILITIES
Revenue
28,681.10
Cash & Marketable Securities
449.90
Accounts Payable
1,611.20
Cost Of Goods Sold
20,768.80
Accounts Receivable
954.80
Salaries Payable
225.20
Gross Profit
7,912.30
Inventories
3,645.20
Other Current Liabilities
1,118.80
Other Current Assets
116.60
Total Current Liabilities
2,955.20
Operating Expenses:
Total Current Assets
5,166.50
Selling, General & Admin.
5,980.80
Other Liabilities
693.40...
Problem 22-9 (LG 22-3) Use the data provided for Gotbucks Bank, Inc., to answer this question....
Problem 22-9 (LG 22-3)
Use the data provided for Gotbucks Bank, Inc., to answer this
question.
Gotbucks Bank, Inc. (in $ millions)
Assets
Liabilities and Equity
Cash
$
42
Core deposits
$
49
Federal funds
32
Federal funds
62
Loans (floating)
117
Euro CDs
142
Loans (fixed)
77
Equity
15
Total assets
$
268
Total liabilities and equity
$
268
Notes to the balance sheet: Currently, the fed funds rate is 9.7
percent. Variable-rate loans are priced at 5 percent...
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