Refer to the 2017 financial statements and accompanying notes of Royal Bank of Canada (RBC) that are found on the company’s website (www.royalbank.ca) or at www.sedar.com.

Instructions

a. What percentage of RBC’s total assets is held in investments (at October 31, 2017 and 2016)? Note that RBC also holds a significant loan portfolio. What is the business reason for holding loans versus securities? Comment on how the investments are classified and presented on the balance sheet.

b. What percentage of total interest income comes from securities (2017 and 2016)? Are there any other lines on the income statement or in other comprehensive income (OCI) relating to the securities? What percentage of net income (include any relevant OCI items) relates to securities (2017 versus 2016)? Calculate an approximate return on the investments in securities. Comment on the return, while looking at the nature of the securities that are being invested in.

c. Read the notes to the financial statements that relate to the securities. Indicate and briefly explain the valuation method(s) applied.