1. There are three banks in East City. First National Bank which currently has 40 percent of the deposits in the area, Second State Bank which currently has 30 percent of the deposits, and New State Bank and Trust which also has 30 percent of the deposits. What is the Herfindahl-Hirschman Index for East City?

2. There are three banks in East City. First State Bank which currently has 25 percent of the deposits in the area, Second State Bank which currently has 40 percent of the deposits, and Third State Bank which has the rest. What is the Herfindahl-Hirschman Index for East City (compute the share of Third State Bank first)?

3. First National Bank's stock is currently selling at $40 per share and the bank recently reported earnings per share of $4.50 on its 200,000 shares outstanding. Second National Bank has 150,000 shares outstanding, with a current market price of $30 per share. It just reported its earnings per share of $5. If First National acquires Second National in a stock purchase, with the two banks agreeing to exchange stock at the current market prices, and post-merger earnings are expected to be $1,800,000, what is the expected EPS post merger?

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