A study of 86 savings and loan associations in six northwestern states yielded the following cost function. C 3.69 0.007999Q 0.000005359Q² 25.0X1 + + (3.69) (3.08) (3.42) (3.50) where C = average operating expense ratio, expressed as a percentage and defined as total operating expense ($ million) divided by total assets ($ million) times 100 percent. Q = output; measured by total assets ($ million) X1 = ratio of the number of branches to total assets ($ million) Note: The number in parentheses below each coefficient is its respective t-statistic. Holding constant the effects of bank branching (X1), what is the level of total assets that minimizes the average operating expense ratio? $1,492.63 million o $746.31 million O $461.31 million $1,562.70 million What is the average operating expense ratio for a savings and loan association with the level of total assets determined in the previous part and 1 branch? 0.74% 1.17% 3.72% 4.31% What is the ratio with 10 branches instead? 4.61% 1.04% 1.48% 4.03%
A study of 86 savings and loan associations in six northwestern states yielded the following cost function. C 3.69 0.007999Q 0.000005359Q² 25.0X1 + + (3.69) (3.08) (3.42) (3.50) where C = average operating expense ratio, expressed as a percentage and defined as total operating expense ($ million) divided by total assets ($ million) times 100 percent. Q = output; measured by total assets ($ million) X1 = ratio of the number of branches to total assets ($ million) Note: The number in parentheses below each coefficient is its respective t-statistic. Holding constant the effects of bank branching (X1), what is the level of total assets that minimizes the average operating expense ratio? $1,492.63 million o $746.31 million O $461.31 million $1,562.70 million What is the average operating expense ratio for a savings and loan association with the level of total assets determined in the previous part and 1 branch? 0.74% 1.17% 3.72% 4.31% What is the ratio with 10 branches instead? 4.61% 1.04% 1.48% 4.03%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:2. Exercise 9.2
A study of 86 savings and loan associations in six northwestern states yielded the following cost
function.
3.69
0.007999Q
+
0.000005359Q²
25.0X1
+
(3.69)
(3.08)
(3.42)
(3.50)
where C = average operating expense ratio, expressed as a percentage and defined as total
operating expense ($ million) divided by total assets ($ million) times 100 percent.
O =
output; measured by total assets ($ million)
X1 = ratio of the number of branches to total assets ($ million)
Note: The number in parentheses below each coefficient is its respective t-statistic.
Holding constant the effects of bank branching (X1), what is the level of total assets that minimizes
the average operating expense ratio?
o $1,492.63 million
o $746.31 million
$461.31 million
$1,562.70 million
What is the average operating expense ratio for a savings and loan association with the level of
total assets determined in the previous part and 1 branch?
0.74%
1.17%
3.72%
4.31%
What is the ratio with 10 branches instead?
4.61%
1.04%
1.48%
4.03%
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