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
![On April 2, 2020, shortly after the $7.5 million deposit outflow, Key Bank had borrowed the needed fund in the fed funds market to cover the shortfall in
reserves for the remainder of the month (29 days, from 4/2 to 4/30). The required yield on a discount basis was 1.5%.
On April 30, 2020, Key Bank finally received the first required payments from its mortgages, loan, and T-bills, and it also paid off its fed funds loan. Key Bank
was required to establish a loan loss reserve at 0.5% of the commercial loan value and the bank was in the 35% tax bracket. The bank had not engaged in any
off-balance-sheet activities.
The following accounting entries record these cash flow transactions.
Accounting entries for mortgages and loan.
Cash
Accounting entries for T-bills.
Cash
Accounting entries for fed funds loan.
Fed funds borrowed
Interest expense
$198.430.35
O $145,676.25
O $271,220.49
Debit
O $259,476.45
Debit
Debit
$3,750,000.00
$4,536.73
Question: What was the dollar amount of interest income from T-bills as of April 30, 2021?
Interest income from mortgages
Reduction in mortgage loan balance
Interest income from commercial
loan
T-bills
Interest income from T-bills
Cash
Credit
Credit
$60,000,000.00
Credit
$3,754,536.73](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1658efd2-e4e9-42a9-911f-47a64b297385%2F1f83b512-79b6-4e27-95d5-819189675af5%2Fi4ekd3j7_processed.png&w=3840&q=75)
Transcribed Image Text:On April 2, 2020, shortly after the $7.5 million deposit outflow, Key Bank had borrowed the needed fund in the fed funds market to cover the shortfall in
reserves for the remainder of the month (29 days, from 4/2 to 4/30). The required yield on a discount basis was 1.5%.
On April 30, 2020, Key Bank finally received the first required payments from its mortgages, loan, and T-bills, and it also paid off its fed funds loan. Key Bank
was required to establish a loan loss reserve at 0.5% of the commercial loan value and the bank was in the 35% tax bracket. The bank had not engaged in any
off-balance-sheet activities.
The following accounting entries record these cash flow transactions.
Accounting entries for mortgages and loan.
Cash
Accounting entries for T-bills.
Cash
Accounting entries for fed funds loan.
Fed funds borrowed
Interest expense
$198.430.35
O $145,676.25
O $271,220.49
Debit
O $259,476.45
Debit
Debit
$3,750,000.00
$4,536.73
Question: What was the dollar amount of interest income from T-bills as of April 30, 2021?
Interest income from mortgages
Reduction in mortgage loan balance
Interest income from commercial
loan
T-bills
Interest income from T-bills
Cash
Credit
Credit
$60,000,000.00
Credit
$3,754,536.73
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