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Solve for the pre-tax operating income

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A commercial bank has the following balance sheet Assets Liabilities Cash 5 Deposits 89 Marketable Securities 10 Subordinary Long Term Debt 1 Loans 80 Equity Capital 10 Fixed Assets 5 Total 100 Total 100 And income statement Net Interest Income 3.00 Loan Losses (10.00) Non-Interest Income 0.90 Non-Interest Expense (2.50) Pre-Tax Operating Income

a) Solve for the pre-tax operating income. Is the equity enough to cover the losses?

b) What is the maximum loan loss this bank can take before it becomes insolvent?

Reference no: EM133113494

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