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Banque du Langenberg holds $575 million interest producing assets earning a net interest margin (NIM) of 2.50%. The iniital net interest income is thus $14.375
Banque du Langenberg holds $575 million interest producing assets earning a net interest margin (NIM) | |||||||
of 2.50%. The iniital net interest income is thus $14.375 million. | |||||||
The bank's President pursues a strategy of holding longer dated, higher risk assets while also increasing | |||||||
leverage and as a result the net interest margin expands by 25 basis points (or 10% on 2.50%) and the | |||||||
total asset base increases by 20%. What is the new net interest income? | |||||||
Original scenario | |||||||
Net interest margin | |||||||
Total assets (millions) | |||||||
Rise in nim | |||||||
Rise in total assets | |||||||
Original scenario | New Scenario | ||||||
Net interest margin | 0.00% | 0.00% | |||||
Total assets | $0 | $0 | |||||
Rise in nim | 0.0% | ||||||
Rise in total assets | 0.0% | ||||||
Net interest income | $0.000 | $0.000 |
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