Question

Friendly Financial has $250 million in consumer loans with an average interest rate of 21 percent. The bank also has $164 million in home equity loans with an average interest rate of 16 percent. Finally, the company owns $44 million in corporate securities with an average rate of 13 percent. Managers at Friendly Financial estimate that next year its consumer loan portfolio will rise to $440 million and the interest rate will fall to 19 percent. They also estimate that its home equity loans will fall to $150 million with an average interest rate of 16 percent, and its corporate securities portfolio will increase to $46 million with an average rate of 13 percent. Required: Estimate Friendly Financial's revenues for the coming year. (Enter your answer in thousands of dollars.) Interest revenue

Answer 1

Interest revenue	=	$ 1,13,580	thousand
Workings:
	Amount	X	Interest Rate	=	Income (million)
Consumer loans	$        440	X	19%	=	$                    83.60
Home equity loans	$        150	X	16%	=	$                    24.00
Securities	$          46	X	13%	=	$                      5.98
Total				=	$                  113.58
Interest revenue	=	$     113.58	million
	=	$ 1,13,580	thousand

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