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
Your company is borrowing $5,800,000 in the form of notes payable from a bank. The bank is charging the company an interest rate of 6% Your company's income tax rate is 27%. What is the net yield and interest rate for the notes payable?
Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from a correspondent bank at a price of $25,950,000, with the promise to buy them back at a price of $26,000,000. a. Calculate the yield on the repo if it has a 5-day maturity. b. Calculate the yield on the repo if it has a 15-day maturity. (For all requirements, use 360 days in a year. Do not round intermediate calculations. Round your percentage answers to 5 decimal places. (e.g., 32.16161)) Yield on the repo a. % b. Yield on the repo
Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from a correspondent bank at a price of $31,950,000, with the promise to buy them back at a price of $32,000,000. a. Calculate the yield on the repo if it has a 5-day maturity. b. Calculate the yield on the repo if it has a 15-day maturity. (For all requirements, use 360 days in a year. Do not round intermediate calculations. Round your percentage answers to 5 decimal places. (e.g., 32.16161)) a. b. X Answer is complete but not entirely correct. Yield on the repo Yield on the repo 1.02857 % 0.34286 %
In the example below, we will use year-end assets. Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment. NIM=Profit/Interest revenue Bank A Loan 7% $90 G-Bond 5% ? Deposits 5% $70 Equity $40 Total Assets $? Total Equity and Deposit $110 The amount of G-bond is $50 $70 $20 $40 $80 $60 $30 $10
A bank has two assets: 70 percent in one-month Treasury bills and 30 percent in real estate loans. If the bank must liquidate its T-bills today, it receives $95 per $100 of face value; if it can wait to liquidate them on maturity (in one month's time), it will receive $100 per $100 of face value. If the bank has to liquidate its real estate loans today, it receives $90 per $100 of face value liquidation at the end of one month will produce $92 per $100 of face value. The one-month liquidity index value for this bank's asset portfolio is: Select one: a. 1.10 b. 0.958 c. 0.979 d. 0.964 e. 1.06 Clear my choice
If Capital Two Bank (CTB) finances a $250,000 2-year fixed-rate loan with a $200,000 1-year fixed-rate CD, based on the repricing model, what is the change in CTB's net interest income for the 1-year maturity bucket when interest rates decrease by 100 basis points? OA. $500 OB. $2,000 OC.-$500 ⒸD.-$2,000
Dome Metals has credit sales of $162,000 yearly with credit terms of net 30 days, which is also the average collection period. a. Assume the firm offers a 2 percent discount for payment in 15 days and every customer takes advantage of the discount. Also assume the firm uses the cash generated from its reduced receivables to reduce its bank loans which cost 8 percent. What will the net gain or loss be to the firm if this discount is offered? (Use a 360-day year.) Loss of: $_________
Angela made an 180-day investment arrangement involving two consecutive 90 day $100,000 bank bills. The maturity proceeds of the first bill will be used to purchase the second bank bill. The remain surplus cash after 90 days will be invested at 2.129% p.a. simple interest rate. The yield rate of first bank bill is 2.477% p.a. simple interest rate and the yield rate of second bank bill is 2.725% p.a. simple interest rate. a) What is price of first bank bill? Round your answer to three decimal places.
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