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Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment. NIM=Profit/Interest revenue Bank A Loan 7%                              $90 G-Bond   5%                             ? Deposits    5%                             $70 Equity                                           $40 Total Assets                       $? Total Equity and Deposit        $110 ROE=       66.66%     22.3%     32.6%     4.8%     9.5%     10.4%     52.13%     8.8%

Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment. NIM=Profit/Interest revenue Bank A Loan 7%                              $90 G-Bond   5%                             ? Deposits    5%                             $70 Equity                                           $40 Total Assets                       $? Total Equity and Deposit        $110 ROE=       66.66%     22.3%     32.6%     4.8%     9.5%     10.4%     52.13%     8.8%

Essentials Of Investments
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
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  • Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment.

NIM=Profit/Interest revenue

Bank A

Loan 7%                              $90

G-Bond   5%                             ?

Deposits    5%                             $70

Equity                                           $40

Total Assets                       $?

Total Equity and Deposit        $110

ROE=

 

   

66.66%
   

22.3%
   

32.6%
   

4.8%
   

9.5%
   

10.4%
   

52.13%
   

8.8%
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