Expected roa net of debt funding costs

Assignment Help Finance Basics
Reference no: EM132507137

1) A bank with a leverage ratio of 20 has a cost of debt of 1.5% pa and a portfolio of assets with an expected yield of 3.5%pa. What are the expected ROA net of debt funding costs and the expected ROE of the bank, using the approach to defining leverage taken in the lecture slides? Show your workings.

2) What will the ROA and ROE actually be if the yield on assets turns out to be 3%? Show your workings.

3) What will the ROA and ROE actually be if the yield on assets turns out to be 1%? Show your workings.

4) Redo the above calculations in parts 1) and 3) for a leverage ratio of (i) 10 (ii) 30? What affect does a higher leverage ratio have on your answers? Show your workings

Reference no: EM132507137

Questions Cloud

Relevant after-tax net cash flows and after-tax profits : a) Calculate the relevant after-tax net cash flows and after-tax profits over the life of the investment.
What will be the price at which you will be willing : If the yield is 6 percent and if similar coupon-bearing bonds pay coupons semiannually, what will be the price at which you will be willing to purchase these bo
What is the principal portion of the 222nd payment : What is the principal portion of the 222nd payment of a fully amortizing $250,000, 30-year fixed rate loan with an interest rate of 4.825%?
Computing the yield to maturity on bond : Jack bought a 10-year bond that pays 8.25 percent annually for $977.14. The face value is $1,000. What is the yield to maturity on this bond?
Expected roa net of debt funding costs : A bank with a leverage ratio of 20 has a cost of debt of 1.5% pa and a portfolio of assets with an expected yield of 3.5%pa. What are the expected ROA net
Is approach to motivating employees ethical : Is his approach to motivating employees ethical? Klein believes that his tactics will motivate the sales force to generate record profits for the upcoming year.
What is xoms risk premium : XOM corporation has a beta of 2.7. If the market has a return of 11% and the risk free rate is 3%, what is XOMs risk premium?
Is one method superior to the other why or why not : Explain how the matching principle applies under the physical measures method and the relative sales value method. Is one method superior to the other? Why
What is xoms risk premium : XOM corporation has a beta of 2.7. If the market has a return of 11% and the risk free rate is 3%, what is XOMs risk premium?

Reviews

Write a Review

Finance Basics Questions & Answers

  The real rate of interest on a fixed-rate loan

1. The real rate of interest on a fixed-rate loan: a. is the same as the effective rate. b. is reduced when inflation increases during the period of the loan.

  Computation of expected return of your portfolio

Computation of expected return and the volatility of your portfolio and Your plan is to borrow another $50,000 at an interest rate of 5% per year for one year

  Which form of business organization that is sole proprietors

Which form of business organization that is Sole proprietorship, Partnership and Corporation can potentially face agency problems

  Determine the level of market risk

Explain how differences in allocations between the risk-free security and the market portfolio can determine the level of market risk.

  Question 1 prepare the pro forma cash flow statements for

question 1. prepare the pro forma cash flow statements for bloomington clinics for five years into the future using the

  What is the expected range of prices

If the price of stock is currently $50, what is the expected range of prices using a 99% level of confidence?

  Comput the after-tax cost of each component of capital

The Mortgage bonds are currently selling for $1,073.61. The bonds are 7%, $1,000 par and pay interest annually. They will mature in 10 years.

  Develop a level production plan for covolo diving gear

Develop a level production plan for Covolo Diving Gear. What are the advantages and disadvantages of this plan? Could Covolo implement a pure chase plan, given the cur¬rent capacity?

  Briefly describe the goals of jit partnerships

Briefly describe the goals of JIT partnerships? Compare and contrast Throughput with manufacturing cycle time. What is the shop's labour productivity if the retail price for each respective service is $60, $150, and $40

  What is the required rate of return on the stock

A stock that currently trades at $10 has a beta of 1.6. The risk-free interest rate for the is 10%, and the market price of risk is expected to be 5%.

  Find the weights of the two pure factor portfolios

Then write out the factor equations for the two pure factor portfolios, and determine their risk premiums. Assume a risk-free rate that is implied by the factor equations and no arbitrage.

  What is the estimated cost of common equity using the capm

What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd