Use the following balance sheet and find the effect on net interest income if the interest onincome will rise by 0.5% and interest on liabilities will rise by 0.75%. The two-year runoffis expected in 8-year T-notes by $20. Note: The planning period is 2-years.Liabilities and EquityOvernight ReposAssets$1075Cash$1701 month T-bills (7.05%)3 month T-bills (7.25%)2 year T-notes (7.50%)year T-notes (8.96%)5 year munis (floating rate)(8.20% reset every 6 months)Subordinated debt757-year fixed rate (8.55%15050810025EquityTotal Liabilities & Equity15Total Assets$335$335(A) $0.375(B) $0.855(C) $1.555(D) $0.585

Interest on income will rise by 0.5% Interest on liabilities will rise by 0.75% 1. 1 month T-bills…

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. Assets Cash Liabilities and Equity Overnight Repos $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 Subordinated debt 75 7-year fixed rate (8.55% 150 50 100 25 $335 Equity Total Liabilities & Equity 15 $335 (A) $0.375 (B) $0.855 (C) $1.555 (D) $0.585

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. Assets Cash Liabilities and Equity Overnight Repos $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 Subordinated debt 75 7-year fixed rate (8.55% 150 50 100 25 $335 Equity Total Liabilities & Equity 15 $335 (A) $0.375 (B) $0.855 (C) $1.555 (D) $0.585

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

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
Assets
$10
75
Cash
$170
1 month T-bills (7.05%)
3 month T-bills (7.25%)
2 year T-notes (7.50%)
year T-notes (8.96%)
5 year munis (floating rate)
(8.20% reset every 6 months)
Subordinated debt
75
7-year fixed rate (8.55%
150
50
8
100
25
Equity
Total Liabilities & Equity
15
Total Assets
$335
$335
(A) $0.375
(B) $0.855
(C) $1.555
(D) $0.585

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