[3] Commercial banks: balance sheet exercise (25 points) Consider the following
ID: 2817826 • Letter: #
Question
[3] Commercial banks: balance sheet exercise (25 points) Consider the following information on Bank M's balance sheet Equity Loan to Banco Santander at 3.25% Loan to Japanese steel maker at 2.50% Mortgage loans at 7.5% Cash Time deposits, fixed rate at 2.50% Demand deposits (no interest) Bonds issued by the bank, fixed rate at 5.50% Personal loans at 7.00% [?1 230 million 685 million · 1,300 million 100 million 1,345 million 990 million 815 million 1,100 million QUESTIONS 1.- Find the value of equity. 2.- Calculate net interest income. 3.- Calculate the loan-to-deposit ratio.Explanation / Answer
1. - Equity value can be calculated as follows -
Total Assets - Total Libilities = Equity
Value of Equity-
Particulars
Amount
Loan To Banco
230
Loan to japenese
685
Mortgage Loans
1300
Personal Loans
1100
Cash
100
Less - Time Deposits
1345
Less - Demand Deposits
990
Less - Bonds issued
815
Value of Equity
265
So, value of Equity is 265 Million
2. Net Interest Income -
Particulars
Amount
Interest Rate
Interest Income
Loan To Banco
230
3.25
7.475
Loan to japenese
685
2.5
17.125
Mortgage Loans
1300
7.5
97.500
Personal Loans
1100
7
77.000
Cash
100
0
0.000
Less - Time Deposits
1345
2.5
-33.625
Less - Demand Deposits
990
0
0.000
Less - Bonds issued
815
5.5
-44.825
Value of Equity
265
Interest income
120.650
Therefore, net Interest income is 120.65 Million
3. - Loan to Deposit Ratio -
Total Loans given /Total Deposits accepted
Total Loans = 3315 Million
Total Deposits = 2335 Million
Loan to Deposit ratio = 142%
Particulars
Amount
Loan To Banco
230
Loan to japenese
685
Mortgage Loans
1300
Personal Loans
1100
Cash
100
Less - Time Deposits
1345
Less - Demand Deposits
990
Less - Bonds issued
815
Value of Equity
265
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