Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A Bank has $100 million in capital, and $900 million of checkable deposit. The bank currently maintains a total reserve of $100 million dollars, $200
A Bank has $100 million in capital, and $900 million of checkable deposit. The bank currently maintains a total reserve of $100 million dollars, $200 million in T-bills, and rest in loans. A new corporate customer opens a checkable deposit account, and deposit $100 million.
Suppose the T-bill yield 1.44%, the Libor is 1.83%, average residential mortgage rate is 5.5%, and average corporate loan is 7%. What is the new ROE? Assume the new structure yield a profit margin of 13%.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started