Question

Megalopolis Bank has the following balance sheet and income statement Assets Cash and due from banks Investment securities Repurchase agreements Loans Fixed assets Other assets Balance Sheet (in millions) Liabilities and Equity $ 10,000 Demand deposits 33,000 NOW accounts 52,000 Retail CDs 100.000 Debentures 25,000 Total liabilities 5,000 Common stock Paid-in capital Retained earnings $225,000 Total liabilities and equity $ 29,000 99,000 38.000 29,000 $195,000 12,000 4,000 14,000 $225,000 Total assets Income Statement Interest on fees and loans Interest on investment securities Interest on repurchase agreements Interest on deposits in banks Total interest income Interest on deposits Interest on debentures Total interest expense Net interest income Provision for loan losses Non interest income Noninterest expenses Income before taxes Taxes Net income $10.000 5,000 7,000 2,000 $ 24,000 $10.000 3,000 $ 13,000 $11,000 2,700 3,000 2,000 $ 9,300 3,500 $ 5,800 For Megalopolis, calculate (Round your answers to 2 decimal places. (e.g., 32.16)): a. c. Return on equity Return on assets Asset utilization a Equity multiplier multiplier Profit margin Interest expense ratio Provision for loan loss ratio Noninterest expense ratio Tax ratio f. 9. h. i.

Answer 1

Solution :-

(a) Return on Equity = Net Income / Share holder funds = $5800 / ( $12000 + $4000 + $14000 ) = 19.33%

(b) Return on Assets = Net Income / Total Assets = $5800 / $225000 = 2.577%

(C) Asset Utilisation = (Interest Income + Intt on Debentures) / Total Assets = ($24000 + $3000) / $225000 = 12.00%

(D) Equity Multiplier = Total Assets / Share holders Fund = $225000 / ( $12000 + $4000 + $14000 ) = 7.5 times

(E) Profit Margin = Net Income / (Interest Income + Intt on Debentures) = $5800 / ($24000 + $3000) = 21.48%

(F) Interest Expense ratio = Intt Exps / (Interest Income + Intt on Debentures) = $13000 / ($24000 + $3000) = 48.15%

As per HomeworkLib policy we need to answer only four sub parts even i answer six so please ask others as Seperate one