Question

Friendly Financial has $230 million in consumer loans with an average interest rate of 19 percent. The bank also has $148 million in home equity loans with an average interest rate of 14 percent. Finally, the company owns $38 million in corporate securities with an average rate of 11 percent.

Managers at Friendly Financial estimate that next year its consumer loan portfolio will rise to $372 million and the interest rate will fall to 17 percent. They also estimate that its home equity loans will fall to $130 million with an average interest rate of 14 percent, and its corporate securities portfolio will increase to $40 million with an average rate of 11 percent.
Required:(a) Estimate Friendly Financial’s revenues for the coming year. (Enter your answer in thousands of dollars.)

Answer 1

$85.84 Million

Step-by-step explanation:

Interest Income has been calculated as under:

Income on Consumer Loan = $372 * 17% = $63.24 Million

Income on Home Equity = $130 * 14% = $18.2 Million

Income on Consumer Loan = $40 * 11% = $4.4 Million

Total Income $85.84 Million

So the total income that the Friendly Financial will earn from the money invested will be $85.84 million.