Questions from Financial Markets

Q: Calculate NewBank’s ROA and NIM for its first month. Assume that

Calculate NewBank’s ROA and NIM for its first month. Assume that net interest equals earnings before taxes, and that NewBank is in the 34% tax bracket.

Q: Calculate NewBank’s ROE and final balance sheet, including its tax liabilities

Calculate NewBank’s ROE and final balance sheet, including its tax liabilities.

Q: If NewBank were required to establish a loan loss reserve at 0

If NewBank were required to establish a loan loss reserve at 0.25% of the loan value for commercial loans, how would this be recorded? Recalculate NewBank’s ROE and final balance sheet, including its...

Q: If NewBank’s target ROE is 4.5%, how much net

If NewBank’s target ROE is 4.5%, how much net fee income must it generate to meet this target?

Q: After making payments for three years, one of the mortgage borrowers

After making payments for three years, one of the mortgage borrowers defaults on the mortgage. NewBank immediately takes possession of the house and sells it at auction for $175,000. Legal fees amount...

Q: Wiggley S&L issues a standard 30-year fixed-

Wiggley S&L issues a standard 30-year fixed-rate mortgage at 7.8% for $150,000. Thirty-six months later, mortgage rates jump to 13%. If the S&L sells the mortgage, how much of a loss is incurred?

Q: Refer to the previous question. In 1981 Congress allowed S&

Refer to the previous question. In 1981 Congress allowed S&Ls to sell mortgages at a loss and to amortize the loss over the remaining life of the mortgage. If this were used for the previous question,...

Q: A bank estimates that demand deposits are, on average, $

A bank estimates that demand deposits are, on average, $100 million with a standard deviation of $5 million. The bank wants to maintain a minimum of 8% of deposits in reserves at all times. What is th...

Q: A 10-year, 7% coupon bond with a face

A 10-year, 7% coupon bond with a face value of $1,000 is currently selling for $871.65. Compute your rate of return if you sell the bond next year for $880.10.

Q: NewBank started its first day of operations with $6 million in

NewBank started its first day of operations with $6 million in capital. $100 million in checkable deposits is received. The bank issues a $25 million commercial loan and another $25 million in mortgag...