Fixed-rate mortgages with average interest rate

Assignment Help Financial Management

Reference no: EM131176577

A savings institution (SI) has funded $12 million of 30-year fixed-rate mortgages with an average interest rate of 5.75%. These assets are funded with time deposits with an average maturity of six months. The deposits are currently paying 3.50%. In six months' time, however, the Fed has raised interest rates twice and the depositors now must be paid 4.25% a) What will happen to the SI's ROA and NIM? *Explain and show effects on ROA and NIM* b) How would your answer change if the SI normally sells the mortgages every 6 months and originates additional new mortgage loans? *Explain and show this effect*

Reference no: EM131176577

Questions Cloud

Experienced an explosion in demand : Sports Novelties, Inc., has experienced an explosion in demand for its feathered football novelties. The firm currently (time 0) pays a dividend of $0.25 per share. This dividend is expected to increase to $0.75 per share 1 year from now. What is the..

Calculate estimate of percent price change due to durration : A 6.5% coupon bearing bond that pays interest semi-annually has a yield to maturity of 4.8% per year. If the bond has a duration of 11.4 years and the market yield decreases 90 basis points, calculate an estimate of the percent price change due to du..

Dissatisfied with the performance of current management : Suppose you have accumulated a sizable investment (100,000 common shares) in Alpine Land and Development Company. You are dissatisfied with the performance of the current management and are considering running for the board of directors. If the votin..

Weighted average cost of capital and debt : Blue Bottling, Inc. (BBI), is a bottling company and is considering expanding into filling 16-ounce bottles. In order to do so, BBI must purchase a new bottling machine. The machine would not replace the machine used to fill 32-ounce bottles. Current..

Fixed-rate mortgages with average interest rate : A savings institution (SI) has funded $12 million of 30-year fixed-rate mortgages with an average interest rate of 5.75%. These assets are funded with time deposits with an average maturity of six months. The deposits are currently paying 3.50%. In s..

At the end of each year a self-employed person deposits : At the end of each year a self-employed person deposits $1,500 in a retirement account that earns 10 percent annually. How much will be in the account when the individual retires at the age of 65 if the contributions start when the person is 45 years..

What conclusion do these percentage returns imply : Investor A makes a cash purchase of 100 shares of AB&C common stock for $55 a share. Investor B also buys 100 shares of AB&C but uses margin. Each holds the stock for one year, during which dividends of $5 a share are distributed. what would have bee..

What is the cash flow from disposal : Reversing Rapids Co. purchases an asset for $169,585. This asset qualifies as a five-year recovery asset under MACRS. The five-year expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%, 19.20%, and 11.52% respectively. what is the cash flo..

Discontinue depreciating the fixed assets of the business : Rick is a sole proprietor who has a small business currently operating at a loss. He would like to discontinue depreciating the fixed assets of the business for the next few years and to carry the deductions over to a future period. What tax conseque..

User Account

All Pages