Calculate the total net effect on the bank

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A bank is considering some investment portfolio shifting. In doing so, the bank is considering selling $70 million in 5-year county-government bonds with a coupon interest of 3 percent, and purchase $70 million in 5-year city government bonds with a coupon interest of 4 percent issued at par. The local bonds being sold are listed at par on the bank's books but they have a current market value of $68 million.

Assume that the bank's corporate income tax rate is 20 percent.

Calculate the TOTAL net effect on the bank's earnings in the current full year resulting from the shift.

Reference no: EM132682054

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