Me Bank has $300 million in interest earning assets upon which it earns an average of 5%. Creditor obligations sum to $200 million which on average costs 4%. The bank has total assets of $400 million.
Question
Me Bank has 200 million which on average costs 4%. The bank has total assets of $400 million.
Solution
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Interest earned from assets: The bank earns an average of 5% on 15 million.
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Interest paid on obligations: The bank pays an average of 4% on 8 million.
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Net interest: The net interest the bank earns (interest earned - interest paid) would be 8 million = $7 million.
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Total assets: The bank has total assets of $400 million. This includes both interest-earning and non-interest-earning assets.
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