Hello tutor please given correct answer financial accounting A regional bank negotiates the purchase of a one-year interestrate cap with a cap rate of 5.45 percent with a large bank. Theoption has a notional principal of $2 million and costs $3,400.In one year, interest rates are 6.33 percent. The regionalbank's net profit, ignoring commissions and taxes, was:a. $105,600b. $18,400c. $17,600d. $14,200e. $11,500

Step 1: Define Net ProfitNet profit or net income is the difference between expenses and revenue.…

Answered: A regional bank negotiates the purchase…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 30P

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A bank has an interest rate spread of 150 basis points on $30 million in earning assets funded by interest-bearing liabilities. However, the interest rate on its assets is fixed and the interest rate on its liabilities is variable. If all interest rates go up 50 basis points, the bank's new pretax net interest income will be __________. a. $600,000 b. $450,000 c. $300,000 d. $250,000 e. $175,000 Clear my choice
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