The Tidewater State Bank has $1,000 in total assets (all of which are earning assets), $700 of which will be repriced within the next 90 days. This bank also has $800 in total liabilities, $400 of which will be repriced within the next 90 days. Currently, the bank is earning 8 percent on its assets and is paying 5 percent on its liabilities. If interest rates on both assets and liabilities decrease by 2 percent in the next 90 days, what would be this bank's net interest margin? 3.4 percent 4 percent

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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The Tidewater State Bank has $1,000 in total assets (all of which are earning assets),
$700 of which will be repriced within the next 90 days. This bank also has $800 in total
liabilities, $400 of which will be repriced within the next 90 days. Currently, the bank is
earning 8 percent on its assets and is paying 5 percent on its liabilities.
If interest rates on both assets and liabilities decrease by 2 percent in the next 90 days,
what would be this bank's net interest margin?
3.4 percent
4 percent
0.4 percent
5.6 percent
2 percent
Transcribed Image Text:The Tidewater State Bank has $1,000 in total assets (all of which are earning assets), $700 of which will be repriced within the next 90 days. This bank also has $800 in total liabilities, $400 of which will be repriced within the next 90 days. Currently, the bank is earning 8 percent on its assets and is paying 5 percent on its liabilities. If interest rates on both assets and liabilities decrease by 2 percent in the next 90 days, what would be this bank's net interest margin? 3.4 percent 4 percent 0.4 percent 5.6 percent 2 percent
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