wing information to answer the question: First National Bank of Beverly Hills (Millions $) Interest rate Assets Liab. & Equity Amount of return Amount Interest Cost Securities 325 3.0% Liabilities $1,175 2.5% Loans 925 8.0% Equity 125 Non-earning 50 0.0% Total $1,300 Total $1,300 First National Bank Industry Average Net interest margin (NIM) Return on Equity (ROE) 2096 4.00% Tax rate 3496 Overhead Efficiency 0.65 Noninterest Expense Provisions for Loan Losses (PPL) $40 Average Loan Rate (ALR) 9% $3 If the net noninterest income were to change to -$20, what would the average loan rate (ALR) have to be to generate a 20% ROE? Compared to the industry, does this ALR appear feasible? O 6.25%, feasible O 6.25%, not feasible O 8.70%, feasible O 8.70%, not feasible O 7.50%, feasible
wing information to answer the question: First National Bank of Beverly Hills (Millions $) Interest rate Assets Liab. & Equity Amount of return Amount Interest Cost Securities 325 3.0% Liabilities $1,175 2.5% Loans 925 8.0% Equity 125 Non-earning 50 0.0% Total $1,300 Total $1,300 First National Bank Industry Average Net interest margin (NIM) Return on Equity (ROE) 2096 4.00% Tax rate 3496 Overhead Efficiency 0.65 Noninterest Expense Provisions for Loan Losses (PPL) $40 Average Loan Rate (ALR) 9% $3 If the net noninterest income were to change to -$20, what would the average loan rate (ALR) have to be to generate a 20% ROE? Compared to the industry, does this ALR appear feasible? O 6.25%, feasible O 6.25%, not feasible O 8.70%, feasible O 8.70%, not feasible O 7.50%, feasible
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:Use the following information to answer the question:
First National Bank of Beverly Hills (Millions $)
Interest rate
Assets
Amount
of return
Liab. & Equity
Amount
Interest Cost
Securities
%24
325
3.09%
Liabilities
$1,175
2.5%
Loans
925
8.0%
Equity
Total
125
Non-eaming
50
0.0%
S1,300
Total
$1,300
First National Bank
Industry Average
Net interest margin (NIM)
Return on Equity (ROE) 2096
4.00%%
Tax rate
3496
Overhead Efficiency
0.65
Noninterest Expense
Provisions for Loan
Losses (PPL)
S40
Average Loan Rate (ALR)
$3
If the net noninterest income were to change to -$20, what would the average
loan rate (ALR) have to be to generate a 20% ROE? Compared to the industry,
does this ALR appear feasible?
O 6.25%, feasible
O 6.25%, not feasible
O 8.70%, feasible
O 8.70%, not feasible
O 7.50%, feasible
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