Question

In the prior year, Grand Falls Bank (GFB) had $8,000,000 in business loans at an average interest rate of 3.5 percent as well as $6,400,000 in consumer loans with an average rate of 8 percent. GFB also has $1,500,000 invested in government securities that pay interest at an average rate of 2.5 percent. For the current year, GFB estimates that the volume of business loans will increase to $12,000,000, and the interest rate will rise to 5 percent. It projects that consumer loans will be $8,000,000 and have an average interest rate of 11 percent. The bank's government security investment will be $3,200,000 and will bear an average interest rate of 4.5 percent. What is GFB's projected revenue for the current year? Projected revenue: $ 0 Check

Answer 1

Grand Falls Bank's total projected revenue for the current year, calculated by applying the interest rates to the projected loan and investment volumes, is $1,624,000.

Step-by-step explanation:

To calculate Grand Falls Bank's projected revenue for the current year, we need to apply the interest rates to the projected loan and investment volumes. The revenue is the sum of the amounts earned from business loans, consumer loans, and government securities.

The projected revenue from business loans is $12,000,000 at 5%, which equals $600,000. The projected revenue from consumer loans is $8,000,000 at 11%, which equals $880,000. Lastly, the projected revenue from government securities is $3,200,000 at 4.5%, which equals $144,000.

To find the total projected revenue, we sum these individual revenues:

• Business loans: $12,000,000 * 0.05 = $600,000
• Consumer loans: $8,000,000 * 0.11 = $880,000
• Government securities: $3,200,000 * 0.045 = $144,000

Total projected revenue = $600,000 + $880,000 + $144,000 = $1,624,000