THE VERY BIG BANK STRESS TEST ($ in millions) CONSTANTS Tax Rate Cash Needed To Start Year Deposits Trading Account Assets Long Term Debt Owed Base Equity for Test Purposes INPUTS Market Volatility ("H" = High, "N" = Normal) Economy ("G" = Good, "O" = OK, "P" = Poor) SUMMARY OF KEY RESULTS Net Income After Taxes End-Of-The-Year Cash On Hand End-Of-The-Year Short Term Debt Owed Pass / Fail Stress Test 2015 2015 2015 2016 10% $ 50,000 $ $ 975,000 $ $ 200,000 $ $ 220,000 $ $ 120,000 $ 2016 2016 2017 10% 50,000 $ 990,000 $ 210,000 $ 240,000 $ 120,000 $ 2017 2017 2018 10% 50,000 1,000,000 220,000 260,000 120,000 2018 2018 Inputs Section Banks typically make more money when the general economy is good than when it is poor because more loans are made in good times and borrowers are more capable of repaying in good economies. When prices in securities markets fluctuate a great deal, the markets are said to be volatile. High volatility implies high risk and an increased potential for securities losses. Your spreadsheet should include the following inputs for the years 2016 to 2018, as shown in Figure 7-4. 11 INPUTS 12 Market Volatility ("H" = High, "N" = Normal) 13 Economy ("G" = Good. "0" = OK, "P" = Poor) 2015 NA C 2016 2017 NA Source: Microsoft product screenshots used with permission from Microsoft Corporation FIGURE 7-4 Inputs section 2018 Market Volatility ("H" = High, "N" = Normal)-Enter a value for the assumed volatility of the securities market during the three-year period. The entry applies to all three years in the test. Economy ("G" = Good, "O" = OK, "P" = Poor)-Enter a value for the expected state of the economy during each of the three years. You do not have to enter the same value for each year. For example, successive entries of "P," "O," and "G" would imply improving economic activity during the three-year period.