Jse the following balance sheet and find the effect on net interest income if the interest on ncome will rise by 0.5% and interest on liabilities will rise by 0.75%. The two-year runoff s expected in 8-year T-notes by $20. Note: The planning period is 2-years. Assets Cash 1 month T-bills (7.05%) 3 month T-bills (7.25%) T-notes (7.50%) Liabilities and Equity Overnight Repos Subordinated debt $10 $170 75 75 7-year fixed rate (8.55% 150 2 50 year 8 vear Tnotes (8 060/) 100

Jse the following balance sheet and find the effect on net interest income if the interest on ncome will rise by 0.5% and interest on liabilities will rise by 0.75%. The two-year runoff s expected in 8-year T-notes by $20. Note: The planning period is 2-years. Assets Cash 1 month T-bills (7.05%) 3 month T-bills (7.25%) T-notes (7.50%) Liabilities and Equity Overnight Repos Subordinated debt $10 $170 75 75 7-year fixed rate (8.55% 150 2 50 year 8 vear Tnotes (8 060/) 100

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

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Concept explainers

Amortized Loans

The term "amortization" refers to spreading the value of a loan or a debt over a series of regular payments or installments comprising of both the principal and interest amount. It generally involves the process where in the value of a loan or an intangible asset is written down over its maturity period.

Question

Use the following balance sheet and find the effect on net interest income if the interest on
income will rise by 0.5% and interest on liabilities will rise by 0.75%. The two-year runoff
is expected in 8-year T-notes by $20. Note: The planning period is 2-years.
Liabilities and Equity
Overnight Repos
Subordinated debt
7-year fixed rate (8.55%
Assets
Cash
$10
$170
1 month T-bills (7.05%)
3 month T-bills (7.25%)
2 year T-notes (7.50%)
8 year T-notes (8.96%)
5 year munis (floating rate)
(8.20% reset every 6 months)
Total Assets
75
75
150
50
100
25
$335
Equity
Total Liabilities & Equity
15
$335
(A) SO.375
(B) $0.855
(C) $1.555
(D) S0.585

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