4. Construct balance sheets for the following scenarios, then calculate both the return on investment and return on equity. . You start a business with $1,000 of your own money and borrow $19,000 from the bank. You buy a number of shares in a company for $20,000 and after a few good quarters, the price of the shares gain in value to $25,000. • At year end 2007, an investment bank held around $90 billion in MBS and $210 billion in other assets. The firm had equity of around $25 billion and financed the rest of its operations with $275 billion in debt. By mid 2008, the value of its MBS portfolio fell to $40 billion. In 2011, a worker at a tech startup in San Francisco bought a modest apartment for $1 million dollars with a mortgage where they put 35% of their own money down. Today that apartment is worth $1.7 million.
4. Construct balance sheets for the following scenarios, then calculate both the return on investment and return on equity. . You start a business with $1,000 of your own money and borrow $19,000 from the bank. You buy a number of shares in a company for $20,000 and after a few good quarters, the price of the shares gain in value to $25,000. • At year end 2007, an investment bank held around $90 billion in MBS and $210 billion in other assets. The firm had equity of around $25 billion and financed the rest of its operations with $275 billion in debt. By mid 2008, the value of its MBS portfolio fell to $40 billion. In 2011, a worker at a tech startup in San Francisco bought a modest apartment for $1 million dollars with a mortgage where they put 35% of their own money down. Today that apartment is worth $1.7 million.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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please answer all three bullet points in full. all three are part of the same question. thank you
Transcribed Image Text:4. Construct balance sheets for the following scenarios, then calculate both
the return on investment and return on equity.
You start a business with $1,000 of your own money and borrow $19,000
from the bank. You buy a number of shares in a company for $20,000
and after a few good quarters, the price of the shares gain in value to
$25,000.
• At year end 2007, an investment bank held around $90 billion in MBS
and $210 billion in other assets. The firm had equity of around $25
billion and financed the rest of its operations with $275 billion in debt.
By mid 2008, the value of its MBS portfolio fell to $40 billion.
In 2011, a worker at a tech startup in San Francisco bought a modest
apartment for $1 million dollars with a mortgage where they put 35%
of their own money down. Today that apartment is worth $1.7 million.
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