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You are given the following balance sheet values of a hypothetical bank (OUR Bank) at t=0. The OUR Bank uses a hurdle rate (cost of
You are given the following balance sheet values of a hypothetical bank (OUR Bank) at t=0. The OUR Bank uses a hurdle rate (cost of capital) of 7.9211% per annum, continuously compounded for computing the future and present values for the cash flows of its loans, which we also call it the market interest (borrowing and lending) rate. Balance sheet as on t=0 (Now) What will be the net interest income or net cash flow or equity at the end of year 1 (end of quarter 4) if the market interest rate for oUR Bank remains at 79211% per annum, continuously compounded throughout this one-year? In other words, all the the intermittent cash flows from the loan are reinvested at the reinvestment rate equal to 7.9211% per annum, continuously compounded (Round off your final answer to at least four decimal places, to obtain as accurate answer as possible on Canvas)
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