Question

Assets Reserves at the Fed 1.2 million Checkable Deposits 0.3 million Saving Deposits 15 million Time Deposits 6 million Federal Funds leans$ 25 millon Bank Copital 56 million 7.5 million $8.5 million milion $3 milhon Loans Securities eeral Pun loan C Calculate Bank of the Coyote's leverage ratio Suppose the Bank of the Cayote earned $0.8 million in after-tax proits Calculate the ROA for Bank of the Coyote cCalculate Bank of the Coyote's ROE 5. For each of the itens below, choose the area of bunk management that would be reaponsible foer the item 1. Liquidity management 2. Asset management 3. Liability managemment Capital adeqaacy managemet Deciding to retain earnings in order to prevent insolvency b Researching other local banks to determine appropriate rates to pary on certificates of deposit C.-Calculating ROE .nd ROA. d. Ordering more currency from the Federal Reserve to bolster vault cash Investing in securities with high rethurn and low risk 6. Your bank has the following balance sheet Assets Liabalties Fixed-rate $100 mallion Fixed-rate $125 million What would happen to bank profits ifthe interest rates n the economy decrease by 1%" Specificany, would the pedea-crease or decrease? How much?

Answer 1

Post question 5 & 6 separately.

	Leverage ratio assesses how much of assets are financed through debt
a	Leverage Ratio	Bank Assets /Bank Capital
		($1.2+$0.3+$1.5+$6+$2.5)/$3
		$11.5/$3
		3.83
	Return on Assets describes how efficiently the company is utilizing its assets to generate earnings
b	Return on Assets(ROA)	Net Profit after Taxes/Bank Assets
		$.8/($1.2+$.3+$1.5+$6+$2.5)
		$.8/$11.5
		6.96%
	Return on equity describes the profit generated by the company on the amount invested by equity holders
c	Return on Equity(ROE)	Net Profit after taxes /Bank Capital
		$.8/$3
		26.67%