19-1 Consider the following income statement for WatchoverU Savings Inc. (in mil

Question

19-1

Consider the following income statement for WatchoverU Savings Inc. (in millions):

What is WatchoverU’s expected net interest income at year-end? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16))

What will be the net interest income at year-end if interest rates rise by 1 percent? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16))

Consider the following income statement for WatchoverU Savings Inc. (in millions):

Explanation / Answer

Answer (a) Interest income Floating rate interest 58*12% = 6.96 Fixed rate loan interest 58*9% = 5.22 Total Income 12.18 Interest Expenses NOW accounts 78*8% = 6.24 Time Deposits 24*8% = 1.92 Total Expense 8.16 Net Income = 12.18 - 8.16 4.02 Answer (b) If interest rate rise by 1% Interest income Floating rate interest 58*13% = 7.54 Fixed rate loan interest 58*9% = 5.22 Total Income 12.76 Interest Expenses NOW accounts 78*8% = 6.24 Time Deposits 24*8% = 1.92 Total Expense 8.16 Net Income = 12.76 - 8.16 4.6

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