The following financial statement is for the current year. From the past information, you know that 8% of fixed-rate mortgages prepay each year. You also estimate that 9% of checkable deposits and 15% of savings accounts are rate sensitive. KLM Bank Assets Liabilities Reserves $ 750,000 Checkable Deposits $ 7,500,000 Securities Money Market Deposits $ 2,750,000 <1 Year $ 3,000,000 Savings Accounts $ 4,000,000 1 to 2 Years $ 4,000,000 CDs > 2 years $ 6,000,000 Variables-rate $ 7,500,000 Residential Mortgages < 1 Year $ 11,000,000 Variables-rate $ 3,500,000 1 to 2 Years $ 2,500,000 Fixed-rate $ 6,500,000 > 2 years $ 1,250,000 Commercial Loans Fed Funds $ 2,500,000 > 1 Year $ 750,000 Borrowings 1 to 2 Years $ 9,250,000 < 1 Year $ 6,000,000 < 2 years $ 15,000,000 1 to 2 Years $ 1,500,000 Buildings, etc. $ 1,150,000 > 2 years $ 1,000,000 Bank Capital $ 2,500,000 Total $50,000,000 Total $50,000,000 Required: Calculate the income gap.
The following financial statement is for the current year. From the past information, you know that 8% of fixed-rate mortgages prepay each year. You also estimate that 9% of checkable deposits and 15% of savings accounts are rate sensitive.
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KLM Bank |
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Assets |
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Liabilities | |
|
Reserves |
$ 750,000 |
Checkable Deposits |
$ 7,500,000 |
|
Securities |
|
|
$ 2,750,000 |
|
<1 Year |
$ 3,000,000 |
Savings Accounts |
$ 4,000,000 |
|
1 to 2 Years |
$ 4,000,000 |
CDs |
|
|
> 2 years |
$ 6,000,000 |
Variables-rate |
$ 7,500,000 |
|
Residential Mortgages |
|
< 1 Year |
$ 11,000,000 |
|
Variables-rate |
$ 3,500,000 |
1 to 2 Years |
$ 2,500,000 |
|
Fixed-rate |
$ 6,500,000 |
> 2 years |
$ 1,250,000 |
|
Commercial Loans |
|
Fed Funds |
$ 2,500,000 |
|
> 1 Year |
$ 750,000 |
Borrowings |
|
|
1 to 2 Years |
$ 9,250,000 |
< 1 Year |
$ 6,000,000 |
|
< 2 years |
$ 15,000,000 |
1 to 2 Years |
$ 1,500,000 |
|
Buildings, etc. |
$ 1,150,000 |
> 2 years |
$ 1,000,000 |
|
|
|
Bank Capital |
$ 2,500,000 |
|
|
|
|
|
|
Total |
$50,000,000 |
Total |
$50,000,000 |
Required: Calculate the income gap.
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