Here is Simple Banks balance sheet (with associated interest rates):

Assets

$800 million Business Loans, 7.5%

$200 million Corporate Bonds, 4.25%

$25 million Reserves, Fed pays 0.5%

$10 million Real Assets

Liabilities

$550 million Demand Deposits

$360 million Time Deposits, 2.5%

$25 million Preferred Shares, 3.3% dividend yield

$100 million Common Shares

1) Calculate the banks Net Interest Margin (remember dividends are not interest): 3 points

2) If capital requirements are 8% for loans and 6% for bonds, calculate the banks capital excess or deficiency. 2 points