2. Consider XYZ Bank whose assets are some investments that are expected to pay off $1980bn in 14 years time . Suppose the rate of interest on safe assets is 5% a year. (a) Determine is the present value of the banks assets discounted at the safe rate of interest and use it to write down the Balance sheet for XYZ Bank assuming it has 10% equity (b) Suppose very shortly after the investment is made the expected value of the banks investments rises to $2475bn in 14 years. What is the return to equity? Measure the return to equity as 100%(Value of Asset - Repayment of loans and Deposits - Equity Stake)/ Equity Stake. 1 (c) What would have been the return to equity if the bank had had 5% equity and if it had 20% equity? (d) Suppose very shortly after the investment is made the expected value of the banks investments falls to $188ibn in 14 years. What is the return to equity if the bank had 10%? Measure the return to equity equity as (Value of Asset - Repayment of loan -Equity Stake)/ Equity Stake. (e) What would have been the return to equity if the bank had had 5% equity and if it had 20% equity? () Suppose very shortly after the investment is made the expected value of the banks investments falls to $1782bn in 14 years. What is the return to equity if the bank had 10% equity? Measure the return to equity as (Value of Asset - Repayment of loan Equity Stake)/ Equity Stake. (g) What would have been the return to equity if the bank had had 5% equity and if it had 20% equity? 2. Consider XYZ Bank whose assets are some investments that are expected to pay off $1980bn in 14 years time . Suppose the rate of interest on safe assets is 5% a year. (a) Determine is the present value of the banks assets discounted at the safe rate of interest and use it to write down the Balance sheet for XYZ Bank assuming it has 10% equity (b) Suppose very shortly after the investment is made the expected value of the banks investments rises to $2475bn in 14 years. What is the return to equity? Measure the return to equity as 100%(Value of Asset - Repayment of loans and Deposits - Equity Stake)/ Equity Stake. 1 (c) What would have been the return to equity if the bank had had 5% equity and if it had 20% equity? (d) Suppose very shortly after the investment is made the expected value of the banks investments falls to $188ibn in 14 years. What is the return to equity if the bank had 10%? Measure the return to equity equity as (Value of Asset - Repayment of loan -Equity Stake)/ Equity Stake. (e) What would have been the return to equity if the bank had had 5% equity and if it had 20% equity? () Suppose very shortly after the investment is made the expected value of the banks investments falls to $1782bn in 14 years. What is the return to equity if the bank had 10% equity? Measure the return to equity as (Value of Asset - Repayment of loan Equity Stake)/ Equity Stake. (g) What would have been the return to equity if the bank had had 5% equity and if it had 20% equity