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Values are in millions of dollars. 1. Using the reserve requirements linked here

ID: 2772209 • Letter: V

Question

Values are in millions of dollars.

1. Using the reserve requirements linked here calculate required reserves http://www.federalreserve.gov/monetarypolicy/reservereq.htm

2. Calculate equity capital.

3. Calculate the leverage ratio. Round to the nearest hundreth.

4. The ROA for Western Alliance was 1.59% January 2015 - March 2015. Calculate ROE. Answer in %

Assets Liabilities Cash 123 Transaction deposits 572 Deposits at Fed 369 Money Market Deposits 4,032 Securities 1,347 Savings Deposits 3,121 Loans 8,667 Time Deposits 1,947 Federal Funds lent 0 Federal Funds borrowed 47 Other assets 627 Other borrowed funds 217 Other liabilities 182

Explanation / Answer

1. Reserve will only be created for Transaction deposites only.
$0 to $14.5 million = 0%
$14.5 million to $103.6 million = 3%
More than $103.6 million = 10%
Total Reserve required = [(103.6 - 14.5) x 3%] + [(572 - 103.6) x 10%] = $49.513 million

2. Equity capital of bank includes Cash, Government Securities, Interest earning loans, inter-bank loans. Thus,
Equity Capital = 123 + 1,347 + 8,667 = $10,137

3. Total Assets = 123 + 369 + 1,347 + 8,667 + 627 = $11,133
Leverge Ratio = Equity Capital/Total Assets = 91%

4. Net Income = 11,133 x 1.59% = $177.01 million
ROE = 177.01/10,137 = 1.75%