Reference no: EM132019410

Queens Bank, which opened in year 2008, had the following activities during the year.

a. The founder of the bank raised $500 by selling shares of the bank in the primary market

b. Queens Bank obtained another $1,000 by selling stocks in the secondary market.

c. Queens Bank was able to attract $2,000 demand deposits.

d. Queens Bank was able to attract $5,000 saving deposits which cost the bank 2% per year.

e. To raise more funds, Queens Bank sold 1-year CDs with the amount of $8,000 at interest rate 5.45% per year.

f. By holding all the capital and deposits that mentioned above, Queens Bank kept 10% of the deposits as reserves, spend 30% on purchasing 1-year Treasury bills, which would pay 4% interest at the end of the year, and lend the rest 60% funds to Jacks Inc at interest rate 10%.

g. One day during the year Queens Bank met a minor liquidity crisis due to a large withdrawal as the housing bubble collapsed. Queens Bank had to borrow overnight funds from Kings Bank for $3,000 at 0.5% overnight rate. During the day, Queens Bank kept the $3,000 funds as vault cash.

h. Queens Bank sold a standby letter of credit to Jacks Inc. and earned $500 from this activity.

i. At the end of the year, Queens Bank paid $700 salaries to the staff.

(1) Mark the above activities of Queens Bank on its balance sheet.

(2) Write out an income statement for Queens Bank for year 2008, including the items of interest income, non-interest income, interest expenses, non-interest expenses and profits. Also, calculate the ROA and ROE of Queens Bank for year 2008.