@ decimals please Consider the following balance sheet for Watchover Savings, In

Question

@ decimals please

Consider the following balance sheet for Watchover Savings, Inc. (in millions):

What is Watchover’s expected net interest income at year-end? (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? (Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16))

Using the one-year cumulative repricing gap model, what is the change in the expected net interest income for a 1 percent increase in interest rates? (Negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16))

@ decimals please

Consider the following balance sheet for Watchover Savings, Inc. (in millions):

Explanation / Answer

a)

expected interest income = 68 * 10% + 94 * 0.07 = 13.38 million

expected interest expense = 109 * 6% + 17 * 6% = 7.56 million

expected net interest income = 13.38 million - 7.56 million

= 5.92 million

b)

expected interest income = 68 * 11% + 94 * 0.07 = 14.06 million

expected interest expense = 109 * 7% + 17 * 6% = 8.65 million

expected net interest income = 14.06 million - 8.65 million

= 5.41 million

c)

repricing or funding gap = 68 -109 = -41 million

change in net interest income = -41 million * 1% = -0.41 million

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