Question

Assume Bank XYZ has 3 assets and 4 liabilities, with the following information: Assets Liabilities yield dollar value cost dollar value 5% 1,000 0% 3,000 10% 4,000 2% 1,000 20% 2,000 4% 1,000 6% 1,000 We also know the noninterest income is 1,000, the noninterest expense 1,200, the provision for loan losses 50, the realized securities gains and losses 40, and the tax 20. What is the net income of Bank XYZ

Answer 1

Answer:

The answer is "$500".

Explanation:

Calculating the total Interest Income:

$= \ ( 5\% \times 1000+10\% \times 4000+20\% \times 2000)\\\\= \ ( \frac{5}{100} \times 1000+ \frac{10}{100} \times 4000+ \frac{20}{100} \times 2000)\\\\=\ (50+400+400) \\\\ =\ 850$

Profits of non-interest=$1000

Earnings and losses for shares = $40

For point 1:

The formula for Total Revenue: $= \text{Total Interest Income}+ \text{Non Interest Income} + \text{Realized Securities gains and losses}$

$= \ (850+1000+40) \\\\ = \ 1890$

For point 2:

The formula for total Expenditure: $\text{(Interest Expense+Non interest expense+Provision for losses+Taxes)}$

$\text{Interest expense}= \ ( 2 \% \times 1000+4\% \times 1000+6\% \times 1000)$

                          $= \ ( \frac{2}{100} \times 1000+ \frac{4}{100} \times 1000+ \frac{6}{100} \times 1000) \\\\= \ (20+40+60)\\\\ =\ 120$

Expenditure for non-interest=$1200

Loan and damage provisions = $50

Tax = $20

Complete Expenditures$= \ (120+1200+50+20) = \ 1390$

Therefore,$\text{net sales = (Total Revenue-Total Expenditure)}$

                               $=\ (1890-1390) \\\\ = \ 500$