Question
answer the following a. You are provided with the following information: a bank has a net income after taxes of $7.0 billion; it has assets
answer the following
a. You are provided with the following information: a bank has a net income after taxes of $7.0 billion; it has assets of $300 billion; and a bank capital of $25 billion. What is the bank's return on assets; its return on equity, and its equity multiplier?
b. Suppose you are the manager of a bank that has $150 billion of assets that have an average duration of four years and who has $135 billion of liabilities that have an average duration of six years. Conduct a duration analysis for the bank, and show what will happen to the net worth of the bank if interest rates rise by 3 percentage points. What actions could you take to reduce the bank's interest-rate risk?
c. We have discussed the principal-agent problem as a form of moral hazard. Discuss the unique problems a bank manager faces in terms of trying to please the owners of the bank and at the same time trying to appease regulators.
explain the answers as presented in the questions
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