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.

1e. If the bank collects an average interest of 7.8% on their loan, and T-bill yield 1.44% return. What is the Return on Equity (ROE)? (Assume the profit margin is 8%)

1f. Suppose there is a reserve outflow of $ 20 million, and the reserve ratio is 11% for the bank. Assume the bank decides to borrow from the Fed to meet reserve requirement. How much they will borrow? Please also show the new the T-account.

1g. Suppose the bank is reconsidering to generate more profit. They want to restructure their assets. After the restructuring, they want have 10% second reserve, 40% residential mortgage, 30% corporate loans or securities, and 20% inter-bank loan to OECD banks. In addition, there is $600 million of off-balance activities for the bank. What is the risk-weighted capital ratio?

1h. Can this bank be classified as well capitalized bank?

1i. 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%.

1j. Recently, 20% of checkable deposit is still in checking accounts. 40% of them becomes saving account, and 40% of them becomes CDs. If interest will increase by 2%, what is the financial result for the bank?

1k. If there is a terrible news hits the mortgage markets, and mortgage rate jump by 6%, which cause the value of the residential mortgage drop by 25%. What does the banks balance sheet look like? What will happen for this bank?