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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 Given G-bond’s interest rate is 5%, Profit is equal to       $4.9     $3.8     $4.0     $2.9     $3.1     $3.3     $20     $10

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 Given G-bond’s interest rate is 5%, Profit is equal to       $4.9     $3.8     $4.0     $2.9     $3.1     $3.3     $20     $10

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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  • 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

Given G-bond’s interest rate is 5%, Profit is equal to

 

   

$4.9
   

$3.8
   

$4.0
   

$2.9
   

$3.1
   

$3.3
   

$20
   

$10
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