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800 Key Bank Metrics: Target = 10.0% ROE - Earning rate on marketable securities = 2.0% Rate paid on borrowed funds = 3.0% Non-interest income

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800 Key Bank Metrics: Target = 10.0% ROE - Earning rate on marketable securities = 2.0% Rate paid on borrowed funds = 3.0% Non-interest income = $5M - Non-interest expense = $25M Average rate paid on deposits = 1.50% Assets Cash Mkt Sec Loans Total ($M) 50 100 850 1,000 Liabilities / Equity Deposits Borrowed $ Equity Total 100 100 1,000 Complete the table below (all cells above the double line) to determine the loan rate that must be charged in order to reach the bank's ROE target. $ Balance Asset / Liability Cash Interest Rate (%) Interest Rate (%) $ Income / (Expense) Marketable Securities Loans Deposits Borrowed Funds Net Interest Income Provided $30M Plus: Non-Interest Income in $5M Less: Non-Interest Expense class - 1/30 ($25M) Net Income $10M ($100M * 10.0%)

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