Question

d) 3. A) Provide the methods used to compute a bank's ROA and ROE. (10 pts) bl boblongo s2rs Deup gnlvello s ROE= ROA= B) If a bank reduces the amount of its capital in half and ROA stays constant, using the appropriate formula, explain what will happen to ROE C) If you are a banker and expect interest rates to rise in the future, would you prefer to make short-term loans or long-term loans? Explain. 4 Explain and illustrate graphically the effect of an increase in expected inflation on interest rates? (Hint: interest rates are determined in the bond market) (5 pts) Tnad dod o n

Answer 1

I can only answer 1 question at a time so I am solving question 3.

Sales Net inione S ১ 3 A) ROA= Alet intome 11 Gtal Assets Avezage Totul aseti ROF = Total Assebs e১৮ Alet income Net inone Rerenue X कं Equity Total aset Reverue ৪) Capital is coastant seduced Rot ॐ Assets temains canctant tas Net inieM ROE = Nध o Va Capital Totce s १xo R R०६ ebe ১ ५eted ১h use \a fruuAD ) र Since w constiain (ixed ४o/९ ae४ ७ Loan, then ০ leanker hक - make o১ conside fiaatiog rake २४६५०/- ১২ oवा +ा 4 ts make Long-teim Coans

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