1. Capital State Bank reports total interest revenue of $86.42 million, total interest expense of $58.62 million, provision for loan losses of $3.6 million, total non-interest revenue of $15.61 million, total non-interest expense of $28.60 million, and an income tax rate of 30%. Total assets are $842.16 million. Given this information:
   • What is Capital State Banks net interest income?
   • What is its net interest margin?
   • What is the return on assets?
   • What is the asset utilization?
   • What is the profit margin?

Answer

Interest revenue	=
Interest expense	=
Net interest income	=
Provision for loan losses	=
Net interest income after provision for loan losses	=
+ Noninterest revenue	=
= Noninterest expense	=
= Net profit before tax	=
= Net profit after tax	=
Net interest income	=
Net interest margin	=
Return on assets	=
Asset utilization	=
Profit margin	=

2. Capital National Banks stock paid a cash dividend of $2.42 per share last year. The stock price changed from $52 per share at the start of the year to $62 per share at the end of the year. What was the banks rate of return?

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3. XYZ bank recently purchased at par a $1,000,000 issue of United States Treasury bonds. The bonds have duration of 3 years and pay 6% annual interest.

• How much would the bonds price change if interest rates were to fall from 6% to 5%?
• How much would the bonds price change if interest rates were to rise from 6% to 7%?
• What would your answer be if the duration of the bond was 6 years?

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4. Corporation XYZ obtains a ceiling agreement from a bank for a 5-year loan of $20 million at a rate of 7% (tied to LIBOR). An upfront fee of 2% is paid by XYZ for the guarantee that rates will not exceed 10%.

• Calculate the quarterly compensation the bank must pay XYZ If LIBOR goes to 12%.
• What kind of option is this for the bank? What kind of option is this for XYZ? When is it profitable?

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5. A municipal bond selling at par has a yield-to-maturity equal to 10%. A bank investment manager wishes to calculate its tax equivalent yield. Assume that it is a qualified bond, the bank's tax rate is 34%, and the average cost of funds for the bank is 8%. What is the answer if the bond is not qualified?

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