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ECON 331 midterm for Feb 25th 2024 Sunday exam solution Concordia University
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- ECON 331
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- Concordia University ( )
ECON 331 midterm for Feb 25th 2024 Sunday exam solution Concordia University
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ECON 331 midterm forFeb 25th 2024 Sunday
exam solution
Concordia University
, lOMoARcPSD|10754654
Dr. Otchere’s Classes: Money and Banking (Econ 331)
SUGGESTED ANSWERS FOR THE Midterm exam
1(i). The bank’s net income after taxes may be calculated by through the following steps. From
the question provided, all figures are in millions of $.
A: INTEREST INCOME
Interest income from loans = 209
Interest income from investment in securities =
26 Total interest income = [209 + 26] = 235
B: INTEREST EXPENSE
Interest paid to depositors = 64
Interest on non-deposit borrowing = 18
Total interest expenses = [64 + 18] = 82
NET INTEREST INCOME = Total interest income less total interest expense) = (235 - 82) =
153
C: NON-INTEREST INCOME
Non-interest income from service fees = 55
Non-interest-income from off-balance sheet activities =
30 Other miscellaneous operating revenues = 13
Total non-interest income = 98
D: NON-INTEREST EXPENSES
Salaries and wages of bank employees = 27
Occupancy and other overhead costs = 3
Other miscellaneous operating expenses = 22
Total non-interest expense = 52 NET
NON-INTEREST INCOME = (98 - 52) = 46
To obtain the PRE-TAX OPERATING PROFIT INCOME, we simply subtract both total
interest expense and total non-interest expense FROM both total interest income and
total non-interest income. Thus, gross profit income before taxes is: (235 + 98) - (82 +
52) = 333 -134 = 199
Net profit income before taxes is determined by subtracting provisions for loan losses
from gross profit income before taxes. That is: (199 - 22) = 177
NET profit INCOME AFTER TAXES is then obtained by subtracting the amount of
income taxes owed from NET income before taxes so that (177 - 33)= 144
Thus, the bank’s net profit income after taxes equal to $144 million.
(ii) The bank’s retained earnings (i.e., undistributed business profits) is also determined
as the bank’s net income after taxes LESS dividends paid to shareholders so that we
get: [144-14] = $130 million.
(iii) From the information given in the question, the bank’s income statement may be
constructed as follows:
The income -expenditure statement: Hypothetical chartered bank in Canada
April 24, 2010 to April 24, 2018
(All figures, in millions of dollars)
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