Consider the following balance sheet for Watchover Savings Incorporated (in millions): Assets Floating-rate mortgages (currently 10% per annum) 30-year fixed-rate loans (currently 7% per annum) Total Liabilities and Equity $ 60 Now deposits (currently 6% per annum) 90 5-year time deposits (currently 6% per annum) Equity $ 150 Total a. What is Watchover's expected net interest income at year-end? (Enter your answer in millions rounded to 1 decimal place. (e.g., 32.1)) b. What will be the net interest income at year-end if interest rates rise by 2 percent? (Enter your answer in millions rounded to 1 decimal place. (e.g., 32.1)) $ 105 25 20 $ 150 c. Using the one-year cumulative repricing gap model, what is the change in the expected net interest income for a 2 percent increase in interest rates? (Negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 1 decimal place. (e.g., 32.1)) a. Net interest income b. Net interest income million million c. Change in net interest income million
Consider the following balance sheet for Watchover Savings Incorporated (in millions): Assets Floating-rate mortgages (currently 10% per annum) 30-year fixed-rate loans (currently 7% per annum) Total Liabilities and Equity $ 60 Now deposits (currently 6% per annum) 90 5-year time deposits (currently 6% per annum) Equity $ 150 Total a. What is Watchover's expected net interest income at year-end? (Enter your answer in millions rounded to 1 decimal place. (e.g., 32.1)) b. What will be the net interest income at year-end if interest rates rise by 2 percent? (Enter your answer in millions rounded to 1 decimal place. (e.g., 32.1)) $ 105 25 20 $ 150 c. Using the one-year cumulative repricing gap model, what is the change in the expected net interest income for a 2 percent increase in interest rates? (Negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 1 decimal place. (e.g., 32.1)) a. Net interest income b. Net interest income million million c. Change in net interest income million
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
Problem 1PS
Related questions
Question
![Consider the following balance sheet for Watchover Savings Incorporated (in millions):
Assets
Floating-rate mortgages (currently 10% per annum)
30-year fixed-rate loans (currently 7% per annum)
Total
Liabilities and Equity
$ 60 Now deposits (currently 6% per annum)
90 5-year time deposits (currently 6% per annum)
Equity
$ 150 Total
a. What is Watchover's expected net interest income at year-end? (Enter your answer in millions rounded to 1 decimal place. (e.g.,
32.1))
b. What will be the net interest income at year-end if interest rates rise by 2 percent? (Enter your answer in millions rounded to 1
decimal place. (e.g., 32.1))
$ 105
25
20
$ 150
c. Using the one-year cumulative repricing gap model, what is the change in the expected net interest income for a 2 percent increase
in interest rates? (Negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 1 decimal place.
(e.g., 32.1))
a. Net interest income
b. Net interest income
million
million
c. Change in net interest income
million](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5bbf44d1-cd81-42c8-a8f4-0aa1bf4e7d86%2F1117b691-9df8-462c-bc8c-0c72992f913e%2Fn9wn1rd_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider the following balance sheet for Watchover Savings Incorporated (in millions):
Assets
Floating-rate mortgages (currently 10% per annum)
30-year fixed-rate loans (currently 7% per annum)
Total
Liabilities and Equity
$ 60 Now deposits (currently 6% per annum)
90 5-year time deposits (currently 6% per annum)
Equity
$ 150 Total
a. What is Watchover's expected net interest income at year-end? (Enter your answer in millions rounded to 1 decimal place. (e.g.,
32.1))
b. What will be the net interest income at year-end if interest rates rise by 2 percent? (Enter your answer in millions rounded to 1
decimal place. (e.g., 32.1))
$ 105
25
20
$ 150
c. Using the one-year cumulative repricing gap model, what is the change in the expected net interest income for a 2 percent increase
in interest rates? (Negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 1 decimal place.
(e.g., 32.1))
a. Net interest income
b. Net interest income
million
million
c. Change in net interest income
million
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Foundations Of Finance](https://www.bartleby.com/isbn_cover_images/9780134897264/9780134897264_smallCoverImage.gif)
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
![Fundamentals of Financial Management (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781337395250/9781337395250_smallCoverImage.gif)
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
![Corporate Finance (The Mcgraw-hill/Irwin Series i…](https://www.bartleby.com/isbn_cover_images/9780077861759/9780077861759_smallCoverImage.gif)
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education