Calculate ROE ROA Net Interest Margin Spread Ratio Asset Utilization Equity mult
ID: 2577879 • Letter: C
Question
Calculate ROE ROA Net Interest Margin Spread Ratio Asset Utilization Equity multiplier Profit Margin Efficiency Ratio Tax ratio
Construct a balance sheet and Income statement for a Rank with the following information $23000 $19000 $89000 59000 $3000 59000 $28000 $19000 $42000 54000 $2000 590000 $15000 Investment Securities Demand Deposits Now accounts Cash and due from banks Interest on fees and loans Retail CDs Long term debt Reverse Repos Interest on investment securities Interest on long term debt Loans Fixed Assets est on reverse repos est on deposits 59000 54000 54000 $12000 $12000 Other assets Paid in capital Retained eamings Common stock Interest on deposits in other banks Provision for loan losses Other income Other expenses $2000 $2000 $1000 Calculate ROE ROA Net Interest Margin Spread Ratio Asset Utilization Equity multiplier Profit Margin Efficiency Ratio Tax ratioExplanation / Answer
Income Statement
Particulars
Amount (in $)
Revenue
Interest on fees and loans
9000
Interest on investment securities
4000
Interest on reverse repos
6000
Interest on deposit in other banks
1000
Less : Interest on long term debts
(2000)
Less: Interest on deposit
(9000)
Net Interest Income
9000
Other income
2000
Total Revenue (A)
11,000
Expenses
Provision for loan losses
2000
Other expenses
1000
Total Expense (B)
3000
Income before tax expenses
8,000
Less: Income tax expense
3000
NET INCOME (A-B)
5,000
Balance Sheet
Particulars
Amount (in $)
Assets
Investment Securities
23000
Cash and due from banks
9000
Reverse Repos
42000
Loans
90000
Fixed Assets
15000
Other assets
4000
Total Assets
183000
Liabilities
Common Stock (Shareholder’s equity)
12000
Paid in capital (Shareholder’s equity)
4000
Retained earnings (Shareholder’s equity)
12000
Demand deposits
19000
Now accounts
89000
Retail CDs
28000
Long term debt
19000
Total Liabilites
183000
ROE= Net income / shareholders’ equity*
= $5,000/$ 28,000
=0.1785 or 17.85%
*Shareholders’ Equity= Common Stock + Paid up capital + Retained earring
= $12,000+4,000+12,000= $ 28000
ROA = Net income / Total assets
= 5,000 /1,83,000
=0.0273 or 2.73%
Net interest margin = Net interest income/* Average interest earning assets *100
= 9,000/77,500*100 = 11.61%
* Average interest earning assets= Investment Securities+ Reverse Repos+ Loans
2
= $ 23,000 +42,000+90,000 =$ 77,500
2
Spread Ratio = Interest earned/ Interest expense
= $ 20,000/ $ 11,000
= 1.82
Asset utilization = Net income / *Average total assets
= $ 5,000/91,500
= 0.0546 or 5.46%
*Average total assets= Total assets/2
= $ 1, 83,000/2 = $ 91,500
Equity Multiplier = Total assets / stockholder's equity*
=$1, 83,000/28000= 6.535
*Shareholders’ Equity= Common Stock + Paid up capital + Retained earring
= $12,000+4,000+12,000= $ 28000
Profit margin= Bank's total interest income - Total interest expense.
=$ 20,000-11,000 =$ 9,000
Efficiency ratio = *Bank's non interest expenses / Net income
=$3000/5000 = 0.6 or 60%
* Bank's non interest expenses= Provision for losses + Other expenses
=$ 2,000 + 1,000
= $ 3,000
Tax ratio = Tax expense/ net income= $ 3000/ 5000 = 0.6 or 60%
Particulars
Amount (in $)
Revenue
Interest on fees and loans
9000
Interest on investment securities
4000
Interest on reverse repos
6000
Interest on deposit in other banks
1000
Less : Interest on long term debts
(2000)
Less: Interest on deposit
(9000)
Net Interest Income
9000
Other income
2000
Total Revenue (A)
11,000
Expenses
Provision for loan losses
2000
Other expenses
1000
Total Expense (B)
3000
Income before tax expenses
8,000
Less: Income tax expense
3000
NET INCOME (A-B)
5,000
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