Q5.First National Bank has the following balance sheet and faces a required reserve ratio on depositsof 10%:AssetsReserves $50 millionSecurities $50 millionLoans $100 millionLiabilitiesDeposits $150 millionBank capital $50 million1. This banks earn $10 million as an annual after-tax profit. Calculate ROA (return on asset) andROE (return on equity) for both banks.2. Assume that depositors withdraw $60 million and the bank experience a $30 million loansdefault. How should the bank balance sheet change?

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Description: Q5.First National Bank has the following balance sheet and faces a required reserve ratio on depositsof 10%:AssetsReserves $50 millionSecurities $50 millionLoans $100 millionLiabilitiesDeposits $150 millionBank capital $50 million1. This banks earn

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First National Bank has the following balance sheet and faces a required reserve ratio on deposits 10%: Assets Reserves $50 million Securities $50 million Loans $100 million Liabilities Deposits $150 million Bank capital $50 million

First National Bank has the following balance sheet and faces a required reserve ratio on deposits 10%: Assets Reserves $50 million Securities $50 million Loans $100 million Liabilities Deposits $150 million Bank capital $50 million

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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