Reference no: EM13154229
Consider a bank with the following income statement: It has $100 in loans with an interest rate of 5 percent; $50 in security holdings, paying 10 percent; reserves of $10; $100 in savings accounts that earn an interest rate of 2.5 percent; checking deposits equal to $30, a net worth of $30, and other expenses of $15. Find bank profit, the return on equity, and return on assets.
a. What is the total income
b. What is the total expenses
c. What is the bank's profit
d. Find the return on equity
e. Find the return on assets
Suppose that a firm a choice of a guaranteed project that will earn it a profit of $20 per $100 invested, and a risky project that will earn it $50 per $100 invested with a 65 percent probability and will earn nothing with a 35 percent probability , If the firm wants to borrow from a bank, what is the lowest amount of collateral that the bank should require to ensure that the firm will choose to proceed with the guaranteed project?
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