The first eleven questions on the exam will deal with the following balance shee

Question

The first eleven questions on the exam will deal with the following balance sheet for Cipher Bank. It will be repeated in future questions to make things a bit easier. Note that you can, and may have to, calculate anything marked with a "???," and anything not included or otherwise calculable - $0 Assets Liabilities and Owner's Equity Buildings and furniture $900 Cash $80 Commercial paper $500 Deposit in the Fed $320 Government agency bonds $800 Home mortgages $1200 Loan to Bank A $400 Loans to firms $1100 Loans to households $1300 Municipal bonds $1400 US government bonds $600 Checking deposits $2100 Savings deposits $800 Time deposits $200 Borrowing from Bank B $500 Borrowing from the Fed $1600 Other liabilities $1000 Equity $??? Total assets = $8600 Total liabilities and owner's equity???

Explanation / Answer

RoA refers to return on assets. It shows how profitable a bank to it's total assets. The formula can be written as

=(NET income/Total assets) *100

RoA=(130/8600)*100 = 1.51% or 1.51 or 0.0151

Note calculation of net income

Total assets is given in the balance sheet.

Particular amount Interest income 240 Add:income from Loc and fee 20 Less:interest expenses 50 Less other expenses (salary and wages) 80 Net income 130

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