The balance sheet of ARGH Insurance shows the following fixed and rate-sensitive assets and liabilities.
-What will be the FI's net interest income at year-end if interest rates do not change?
A)$3.20 million.
B)$5.39 million.
C)$4.04 million.
D)$1.89 million.
E)$1.35 million.

Question

The balance sheet of ARGH Insurance shows the following fixed and rate-sensitive assets and liabilities. 
-What will be the FI's net interest income at year-end if interest rates do not change?
A)$3.20 million. 
B)$5.39 million. 
C)$4.04 million. 
D)$1.89 million. 
E)$1.35 million.

Quizplus · Accepted Answer

NII if rates remain unchanged
NII = (RSAj x Rj) - (RSLi x Ri)
II = ($35,000,000 x 0.10) + ($21,000,000 x 0.09) = $3,500,000 + $1,890,000 = $5,390,000
IE = ($40,000,000 x 0.08) + ($12,000,000 x 0.07) = $3,200,000 + $840,000 = $4,040,000
NII = $5,390,000 - $4,040,000 = $1,350,000.

The Balance Sheet of ARGH Insurance Shows the Following Fixed