Question

Bank of the Atlantic has liabilities of $4 million with an average maturity of two years paying interest rates of 4.0 percent annually. It has assets of $5 million with an average maturity of 5 years earning interest rates of 6.0 percent annually.What is the bank's net interest income for the current year? a. $300,000. b. $140,000. c. $160,000. d. $280,000. e. $80,000.

Answer 1

Answer:

                                                                                        $

Interest received on assets = $5,000,000 x 6% = 300,000

Interest paid on liabilities     = $4,000,000 x 4% = (160,000)

Net interest income for the current year                 140,000

The correct answer is B

Explanation:

In this case, we need to calculate the interest received on assets and interest paid on liabilities. Then, we will deduct the interest paid on liabilities from interest received from assets.