Problem: Consider the following income statement for WatchoverU Savings Inc. (in millions):
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Assets
|
|
Liabilities
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|
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Floating-rate (currently 10% annually
|
$50
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NOW accounts (currently 6% annually)
|
$70
|
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30-year fixed-rate loans (currently 7% annually)
|
50
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Time deposits (currently 6% annually)
|
20
|
|
|
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Equity
|
10
|
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Total
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$100
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$100
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Q1. What is WatchoverU's expected net interest income at year-end?
Q2. What will be the net interest income at year-end if interest rates rise by 2 percent?