• IfyouhaveplayedaSimulationcalledProBankerIneedhelpansweringthesequestionsassoonaspossible from the pro bankerassignment attachment..please use spreadsheet and players manual for reference. Need answer as soon as possible please.

Summary Balance Sheet Quarter ASSETS Required Reserves (at the Federal Reserve) Excess Reserve Balances Federal Funds Sold Fixed Rate Corporate Loans Floating Rate Corporate Loans Installment Loans Mortgages Bonds Fixed Assets Loan Loss Allowance Total Assets LIABILITIES Federal Funds Purchased Retail Demand Deposits Corporate Demand Deposits Negotiable CDs Passbook Deposits Retail CDs Long-term Retail Deposits Discount Window Advances Net Worth and Retained Earnings TOTAL LIABILITIES AND NET WORTH Q0 Q1 Q2 w/same 0 1 2 18,513.76 99,452.00 263,247.39 235,528.13 265,947.84 120,000.00 14,739.00 3,500.29 1,013,927.84 18,452.22 109,075.19 285,726.74 231,067.17 261,505.94 120,000.00 14,370.53 3,197.08 1,037,000.72 18,930.48 129,514.05 342,604.64 248,067.76 269,735.31 120,000.00 14,011.26 3,443.13 1,139,420.36 25,000.00 99,447.39 85,690.19 132,000.00 58,294.50 235,816.95 210,945.86 75,463.21 91,269.72 1,013,927.84 50,000.00 96,594.03 87,928.22 149,000.00 64,032.00 251,294.73 216,209.07 29,837.55 92,105.12 1,037,000.72 50,000.00 95,616.87 93,687.90 166,000.00 77,616.25 291,801.83 237,118.01 36,486.76 91,092.75 1,139,420.36 Q2 w/more % Change % Change % Change Difference Q0 to Q1 Q1 to Q2 Q1 to Q2 With Same With more Ad Expenses Ad Expenses 2 23,687.49 519.69 5,472.59 129,514.05 342,604.64 251,624.94 272,203.87 120,000.00 14,011.26 3,473.73 1,156,164.80 -0.33% 2.59% 28.4% 9.68% 8.54% -1.89% -1.67% 0.00% -2.50% -8.66% 2.28% 18.74% 19.91% 7.36% 3.15% 0.00% -2.50% 7.70% 9.88% 18.74% 19.91% 8.90% 4.09% 0.00% -2.50% 8.65% 11.49% 50,000.00 113,775.39 123,099.51 166,000.00 79,199.76 294,450.44 238,327.40 91,312.30 1,156,164.80 100.00% -2.87% 2.61% 12.88% 9.84% 6.56% 2.50% -60.46% 0.92% 2.28% 0.00% -1.01% 6.55% 11.41% 21.21% 16.12% 9.67% 22.28% -1.10% 9.88% 0.00% 17.79% 40.00% 11.41% 23.69% 17.17% 10.23% -100.00% -0.86% 11.49% 1.54% 0.94% 18.80% 33.45% 2.47% 1.05% 0.56% 02/15/2017 ProBanker Questions: Estimate the percent change from Q0 to Q1 in the shaded cells and answer the questions below. 1. Comment on the sensitivity of deposits and loans to advertising expenses using the numbers derived in the shaded cells. 2. Estimate the additional cost incurred for accessing the discount window advances in Quarter 1. 3. Estimate the cost of deposit insurance for the quarter 2. Simulate next quarter and record the results of quarter 2 in the table and estimate the percent change from Q1 to Q2. Estimate the percent change from Q1 to Q2 and fill in the numbers for the remaining shaded cells and answer the questions below 1. Comment on the sensitivity of deposits and loans to advertising expenses using the numbers derived in the shaded cells. 2. Estimate the additional cost incurred for accessing the discount window advances in Quarter 1. 3. Estimate the cost of deposit insurance for the quarter 2. ProBanker Exercise 2 (Regional Bank) This assignment will a. Study the impact of advertising on volumes of loans and deposits. b. Estimate the interest expense on discount window advances. c. Assess the impact of the costs of deposit insurance on the overall costs of funds. For this exercise, we will create a new Autosim and call it \"Your Name Assignment 2\". The rest of the instructions are similar to Assignment 1. Please note that in Autosim you are playing solo against the computer. If you are in a competitive game, the results can be different because demand and supply are affected by the decisions of your competitors. Assignment 1: 1. Create a personal Autosim. a. Click on Games. b. Click on New Autosim game. c. Select Assignments Regional Bank template in using template. Note: Make sure NOT to choose Sample Regional Bank template. d. Type a name for the new Autosim in New game's name e. Example \"John Roger Assignment 2\" f. Click on Create Game 2. Input decisions to your new Autosim. There are four categories of decisions - 'Account Quantities, Account Interest Rates, Advertising and Other Decisions. Click on ProBanker icon on the top left to go to the home page. a. Click on View Games. b. Select your newly created Autosim. c. Click on Play bank. Account Quantities - change the following a. Target Reserves for Deposits = $25,000 b. Federal Funds Purchased (not Sold) = $50,000 c. 360 Days CDs to Issue = $50,000 d. New Bonds to Purchase = $15,000 e. The remaining boxes should all be zeroes. 3. Account Interest Rates - Reduce loan rates by 0.3 percent and increase deposit rates by 1% a. Reduce Fixed Rate Corporate Loan Rate = 9.00 percent b. Reduce Floating Rate Loan Spread = 3.70 percent c. Reduce Installment Loan Rate =10.70 percent d. Reduce Mortgage Loan Rate = 8.70 percent e. Increase Retail CDs Rate = 7.00 percent f. = 6.00 percent Increase Passbook Savings Rate g. Increase Long-Term Retail Deposits Rate = 8.50 percent h. The remaining boxes should all be zeroes. Advertising - Leave as is (150, 80,410,580,290,140, 60) 4. Other decisions - Leave as is (0, 1, 0, 0, 100, 100) 5. Simulate next period (on left side of the screen). After a few seconds, you will notice a flicker and it should say End of Period 1. You are ready to review the results. 6. Record the results of quarter 1 in the table below by clicking on Reports. Alternatively, you can copy and paste from the Excel file 'Download full reports' in Excel. Estimate the percent change from Q0 to Q1 in the shaded cells and answer the questions below. The manual can help explain the results. Assignment 1 continued 7. Input decisions for quarter 2 as given below: Account Quantities - change the following a. Target Reserves for Deposits = $25,000 b. Federal Funds Purchased = $50,000 c. 360 Days CDs to Issue = $50,000 d. New Bonds to Purchase = $15,000 e. The remaining boxes should all be zeroes 8. Account Interest Rates - Reduce loan rates by an additional 0.3 percent and increase deposit rates by an additional 1% a. b. c. d. e. f. g. Reduce Fixed Rate Corporate Loan Rate = 8.70 percent Reduce Floating Rate Loan Spread = 3.40 percent Reduce Installment Loan Rate =10.40 percent Reduce Mortgage Loan Rate = 8.40 percent Increase Retail CDs Rate = 8.00 percent Increase Passbook Savings Rate = 7.00 percent Increase Long-Term Retail Deposits Rate = 9.50 percent 1. Advertising -Increase the advertising expenses by 25%. a. b. c. d. e. f. g. Advertising installment loans Mortgage Loans Retail demand deposits Retail corporate deposits Retail CDs Passbook savings IRAs 187.50 100.00 512.50 725.00 362.50 175.00 75.00 9. Simulate next quarter and record the results of quarter 2 in the table and estimate the percent change from Q1 to Q2. Estimate the percent change from Q1 to Q2 and fill in the numbers for the remaining shaded cells and answer the questions below. Questions: Estimate the percent change from Q0 to Q1 in the shaded cells and answer the questions below. 4. Comment on the sensitivity of deposits and loans to advertising expenses using the numbers derived in the shaded cells. 5. Estimate the additional cost incurred for accessing the discount window advances in Quarter 1. 6. Estimate the cost of deposit insurance for the quarter 2. Simulate next quarter and record the results of quarter 2 in the table and estimate the percent change from Q1 to Q2. Estimate the percent change from Q1 to Q2 and fill in the numbers for the remaining shaded cells and answer the questions below 4. Comment on the sensitivity of deposits and loans to advertising expenses using the numbers derived in the shaded cells. 5. Estimate the additional cost incurred for accessing the discount window advances in Quarter 1. 6. Estimate the cost of deposit insurance for the quarter 2. Summary Balance Sheet Quarter ASSETS Required Reserves (at the Federal Reserve) Excess Reserve Balances Federal Funds Sold Fixed Rate Corporate Loans Floating Rate Corporate Loans Installment Loans Mortgages Bonds Fixed Assets Loan Loss Allowance Total Assets LIABILITIES Federal Funds Purchased Retail Demand Deposits Corporate Demand Deposits Negotiable CDs Passbook Deposits Retail CDs Long-term Retail Deposits Discount Window Advances Net Worth and Retained Earnings TOTAL LIABILITIES AND NET WORTH Q0 0.00 Q1 1.00 Q2 w/o 2.00 Q2 w/more 2.00 18513.76 0.00 0.00 18452.22 0.00 0.00 18930.48 0.00 0.00 99452.00 263247.39 235528.13 265947.84 120000.00 14739.00 3500.29 1013927.84 109075.19 285726.74 231067.17 261505.94 120000.00 14370.53 3197.08 1037000.72 129514.05 342604.64 248067.76 269735.31 120000.00 14011.26 3443.13 1139420.36 129514.05 342604.64 251624.94 272203.87 120000.00 14011.26 3473.73 1156164.80 25000.00 99447.39 85690.19 132000.00 58294.50 235816.95 210945.86 75463.21 91269.72 1013927.84 50000.00 96594.03 87928.22 149000.00 64032.00 251294.73 216209.07 29837.55 92105.12 1037000.72 50000.00 95616.87 93687.90 166000.00 77616.25 291801.83 237118.01 36486.76 91092.75 1139420.36 50000.00 113775.39 123099.51 166000.00 79199.76 294450.44 238327.40 0.00 91312.30 1156164.80 23687.49 519.69 5472.59 % Change Q0 to Q1 % Change Q1 to Q2 With Same Ad Expenses % Change Q1 to Q2 With more Ad Expenses Difference Player's Manual for Flannery and Flood's ProBanker Mark J. Flannery Mark D. Flood Player's Manual: for Flannery and Flood's ProBanker Mark J. Flannery Mark D. Flood Copyright 2003 ProBanker Simulations, LLC Table of Contents Some Definitions ..................................................................................................... viii About the Authors ...................................................................................................... ix 1. Introduction ............................................................................................................ 1 1.1. Two Modes of Operation: Autobank and Competitive .......................................... 1 1.2. Managing a Bank: The Basics .......................................................................... 3 1.3. Managing a Bank: Some Complications ............................................................. 5 1.3.1. From Profits to Market Value ................................................................ 5 1.3.2. Operating Costs .................................................................................. 6 1.3.3. Loan Losses ....................................................................................... 7 1.3.4. Reserve Requirements ......................................................................... 7 1.3.5. Advertising ........................................................................................ 8 1.4. How to Use This Manual ................................................................................ 9 2. Operating the Player Software .................................................................................. 11 2.1. Registering to Use Probanker ........................................................................ 11 2.2. Changing Your Profile ................................................................................. 12 2.3. Playing Games ............................................................................................ 14 2.4. Generating Reports ...................................................................................... 16 2.5. Downloading Bank Data to a Spreadsheet ........................................................ 17 2.6. Entering Decisions ...................................................................................... 17 2.7. Using Autobank to Learn About ProBanker ...................................................... 19 2.8. Help ......................................................................................................... 19 3. ProBanker's Financial Structure (Overview) ................................................................ 21 3.1. The Balance Sheet ....................................................................................... 21 3.2. The Income Statement .................................................................................. 24 3.3. CEO Decisions and ProBanker's Timing Convention .......................................... 26 4. ProBanker's Financial Structure (Details) ................................................................... 28 4.1. General Account Features ............................................................................. 28 4.2. Determining the Quantity of Rate-Set Items ..................................................... 29 4.3. Operating Costs, Part I ................................................................................. 30 4.4. Operating Costs, Part II (optional) .................................................................. 31 4.4.1. Operating Cost Example #1: Fixed-rate loans ......................................... 31 4.4.2. Operating Cost Example #2: Multi-period mortgage loans ........................ 31 4.5. Detailed Account Descriptions ....................................................................... 32 4.5.1. Asset Accounts ................................................................................. 32 4.5.2. Liability Accounts ............................................................................ 34 4.6. Loan Losses and Non-Performing Loans .......................................................... 36 4.6.1. Controlling Credit Quality .................................................................. 37 4.6.2. Accounting for Loan Losses ............................................................... 37 4.6.3. Bank Examinations and the LLA ......................................................... 38 4.7. Macroeconomic Effects on Your Bank ............................................................ 38 4.8. Bank Leverage and Purchased Funds .............................................................. 39 4.9. Capital and Capital Adequacy ........................................................................ 40 4.10. Market Value of Bank Equity ....................................................................... 43 4.11. Balancing Your Balance Sheet ..................................................................... 44 4.11.1. When Assets Initially Exceed Liabilities .............................................. 44 4.11.2. When Liabilities Initially Exceed Assets .............................................. 45 4.12. Reserve Requirements ................................................................................ 45 5. The Effects of Your Decisions .................................................................................. 47 5.1. Quantities to Choose .................................................................................... 47 5.1.1. Initial Reserve Allocation ................................................................... 47 5.1.2. Federal Funds Sold ........................................................................... 47 5.1.3. Federal Funds Purchased .................................................................... 48 5.1.4. Negotiable CDs To Issue (three maturity choices) ................................... 48 iv Player's Manual 5.1.5. New 8-Quarter Bonds To Purchase ...................................................... 48 5.1.6. Bonds to Sell (seven maturity choices) .................................................. 48 5.2. Rates to Choose .......................................................................................... 48 5.2.1. Fixed Rate Corporate Loans ................................................................ 48 5.2.2. Floating Rate Loan Spread .................................................................. 48 5.2.3. Installment Loan Rate ........................................................................ 49 5.2.4. Mortgage Loan Rate .......................................................................... 49 5.2.5. Retail CDs ....................................................................................... 49 5.2.6. Passbook Saving Accounts ................................................................. 49 5.2.7. IRA Accounts (Long-term retail time deposits) ....................................... 49 5.2.8. Demand Deposits (Retail and Corporate) ............................................... 50 5.3. Advertising Decisions (seven categories) ......................................................... 50 5.4. Capital Structure Decisions ........................................................................... 50 5.4.1. Number of Shares to Sell .................................................................... 50 5.4.2. Total Dividends ................................................................................ 50 5.5. Other (Miscellaneous) Decisions .................................................................... 50 5.5.1. Provision for Loan Losses .................................................................. 50 5.5.2. Corporate Loan Standard .................................................................... 51 5.5.3. Percentage of Cost Charged to Demand Deposits (Retail and Corporate) ..... 51 6. Analyzing Your Bank's Condition and Making Good Decisions ...................................... 52 6.1. Pricing Rate-Set Assets and Liabilities ............................................................ 52 6.1.1. Obtain Adequate Loanable Funds ........................................................ 52 6.1.2. The All-Inclusive Cost of Deposits and Other Liabilities .......................... 53 6.1.3. The Net Return on Loans and Other Assets ............................................ 55 6.2. Managing Interest Rate Risk .......................................................................... 58 6.3. Customer Relationships and Effective Maturities ............................................... 59 6.4. Managing Your Capital Ratio ........................................................................ 60 6.5. Estimating the Rate-Sensitivity of Loan Demands and Deposit Supplies ................ 60 6.5.1. Slope Estimates from Competitive Mode Outputs ................................... 61 6.5.2. Slope Estimates from Autobank Outputs ............................................... 63 A. Answers to Frequently Asked Questions .................................................................... 66 B. Sample Reports for the Regional Low-Cost Template after Q0 ....................................... 78 B.1. Summary Balance Sheet ............................................................................... 78 B.2. Balance Sheet ............................................................................................ 78 B.3. Income and Expense Report .......................................................................... 80 B.4. Capitalization Report ................................................................................... 82 B.5. Loan Performance Report ............................................................................. 83 B.6. Bond Portfolio Report ................................................................................. 83 B.7. Regional Interest Rate Report ........................................................................ 83 B.8. Bond Market Report .................................................................................... 84 B.9. Economic Environment Report ...................................................................... 84 B.10. Performance Report ................................................................................... 85 v List of Figures 1.1. ProBanker simulation cycle, autobank mode ............................................................... 1 1.2. ProBanker simulation cycle, competitive mode ........................................................... 2 3.1. Event Timing in ProBanker ................................................................................... 26 5.1. Game Decisions Page ........................................................................................... 47 6.1. Estimated Supply Curve for IRA Balances ............................................................... 62 6.2. Marginal and Average Costs of Retail CDs .............................................................. 64 vi List of Tables 1.1. Autobank versus Competitive Modes of Play .............................................................. 2 1.2. Basic Bank Balance Sheet ....................................................................................... 3 1.3. Alternative BabyBank Balance Sheets ....................................................................... 4 1.4. Alternative BabyBank Income Statements .................................................................. 4 1.5. Revised Income Statement, to Include Noninterest Expenses ......................................... 6 1.6. Revised Income Statement, to Include Noninterest Expenses and a Provision for Loan Losses ................................................................................................................................. 7 1.7. Revised Balance Sheet, to Include Cash Reserves ........................................................ 7 1.8. Revised Income Statement, to Reflect Cash Reserves ................................................... 8 1.9. Effect of Advertising on Balance Sheet in , Given Decision Set "A" ................................ 8 1.10. Effect of Advertising on Income Statement, Given Decision Set "A" (compare to ) .......... 9 2.1. Summary Information about Entering Decisions ........................................................ 18 3.1. Summary Balance Sheet ....................................................................................... 22 3.2. ProBanker Account Characteristics ......................................................................... 24 3.3. A Stylized Version of ProBanker's Income and Expense Report ................................... 25 4.1. Transaction Costs Associated with ProBanker Accounts ............................................. 32 4.2. Loan Performance Report ..................................................................................... 37 4.3. Bond Portfolio Report .......................................................................................... 39 4.4. Capitalization Report ........................................................................................... 42 4.5. Performance Report (Compares Banks) ................................................................... 44 6.1. Loan Performance Report ..................................................................................... 56 6.2. Maturity Gap Worksheet ....................................................................................... 58 6.3. Excerpt from Full Balance Sheet ............................................................................ 62 6.4. Marginal Cost Estimates for IRA Balances, using Competitive Mode output ................... 63 6.5. Marginal Cost Estimates for Retail CD Balances, using Autobank Mode output .............. 64 vii Some Definitions Game Template Region Economy One or more banks operating in the same simulated regulatory and macroeconomic environment. Games may be either Competitive (many banks interacting) or Autobank (one bank competes against pre-programmed competitors) Modes. The basis for a Game. Players use a Template to create an Autobank Game; the Administrator uses a Template to create a set of identical banks that will operate in the same economy. A group of banks that compete directly with one another for loans and most types of deposits. Sometimes called a "Market." A group of banks operating under the same macroeconomic conditions (in particular, GDP and the riskless term structure). Usually, an economy is organized into several distinct Regions. viii About the Authors Mark J. Flannery Mark J. Flannery has held an Eminent Scholar Chair (first the "Barnett" chair, now "BankAmerica") in Finance at the University of Florida since 1989. He previously served on the faculties of UNC-Chapel Hill, the University of Pennsylvania's Wharton School, and (as a visitor) at the London Business School and the University of New South Wales. For five years, he was a Research Adviser to the Federal Reserve Bank of Philadelphia. He was elected to the American Finance Association's Board of Directors in 1999, and to the Financial Management Association Board in 2000. He holds degrees in economics from Princeton and Yale Universities. Flannery presently edits the Journal of Money, Credit and Banking, was a founding editor of the e-periodical FMA-Online, and serves as an Associate Editor for six other academic journals. He has published extensively in academic and practitioners' finance and economics journals. The majority of his work concerns the management and regulation of financial institutions, but he has also studied problems in information economics, capital structure, and asset market equilibrium. Early in his career, he co-authored (with Dwight Jaffee) the first scholarly economic analysis of the "cashless society". In addition to his research activities, Flannery has consulted with private banks and government agencies, and served on the Board of the Barnett Bank of Alachua County (a $425 million dollar community bank). Mark D. Flood Mark D. Flood did his undergraduate work at Indiana University in Bloomington, where he majored in finance (B.S., 1982), and German and economics (B.A., 1983). In 1990, he received his Ph.D. in finance from the Graduate School of Business at the University of North Carolina at Chapel Hill. He was a Visiting Scholar and Economist in the Research Department of the Federal Reserve Bank of St. Louis from 1989 to 1993. From 1993 to 2003, he served as an Assistant Professor of finance at Concordia University in Montreal, a Visiting Assistant Professor of Finance at the University of North Carolina at Charlotte, and a Senior Financial Economist in the Division of Risk Management at the Office of Thrift Supervision. He is currently a Senior Financial Economist with the Federal Housing Finance Board in Washington, D.C. His research interests include financial markets and institutions, securities market microstructure, and bank market structure and regulatory policy. His research has appeared in many scholarly journals, including the Review of Financial Studies, the Journal of International Money and Finance, and the St. Louis Fed's Review. ix x Chapter 1. Introduction Successful managers of financial services firms must understand the economic forces affecting their businesses. While many analytical tools can be learned from a textbook, a manager's real challenge lies in applying those tools to the "real world." ProBanker provides this opportunity in a controlled, dynamic framework, which challenges students and practitioners to integrate their finance training with realworld situations. Unlike traditional learning methods such as textbooks, lectures, or static case studies, the ProBanker environment responds to your decisions. Your actions affect both your competitors' and your own profitability. In ProBanker, each player (or team of players) takes the role of the Chief Executive Officer (CEO) at a domestic U.S. bank. Players choose their bank's portfolio composition, loan and deposit pricing, credit risk exposure, maturity (duration) gaps, and capital structure, while complying with important regulatory restrictions. Your goal is to maximize shareholder wealth by producing high, steady earnings. Success requires that you understand financial decision making -- and apply it better than your competitors do. Unlike a textbook's end-of-chapter question or a standard problem set, ProBanker doesn't clearly identify all the variables you need to know in order to make good financial decisions. You will apply your financial knowledge in a (realistic) world of incomplete or imprecise information. Managers must identify the facts they need, figure out how to collect that information, and assess how confident they should be about the accuracy of available information. In other words, this sort of simulation game challenges you to apply financial theory in a complex, uncertain environment -- much as you will when making real business decisions. 1.1. Two Modes of Operation: Autobank and Competitive Your administrator may choose to run ProBanker in one (or both) of two Operating Modes, Autobank Mode and Competitive Mode. In Autobank Mode, you play "against the machine." You implement the full set of financial decisions, and your bank competes with a number of market rivals. However, the behavior of your Autobank rivals is pre-programmed. They will not react to your product pricing and marketing strategies. Autobank's abstraction from competitors' responses permits you to learn about ProBanker's program features and economic characteristics. Figure 1.1. ProBanker simulation cycle, autobank mode Figure 1.1 illustrates ProBanker's Autobank Mode of play. As soon as your decisions are ready, you run the simulation yourself, and see the results within a few seconds. You can learn a lot in a fairly short period of time. Autobank can "turn back time". This feature permits you to simulate a variety of pricing, advertising, and funding decisions, starting from the same point in time. For example, set the installment 1 Introduction loan rate to 11% for four successive quarters. Then return to the initial balance sheet and simulate the impact of a lower or higher loan rate over the same four periods. Don't be afraid to try something radical: at the worst, you can reset Autobank to its initial condition whenever you like. Figure 1.2. ProBanker simulation cycle, competitive mode You will use ProBanker's Competitive Mode of operation to compete directly with other bankers in your course. Your Administrator will divide the banking industry (i.e., your course) into separate geographic Regions. Each bank competes directly with the other banks in its Region. Banks in different Regions have no direct effect on one another, although they do operate under the same macroeconomic conditions (GDP growth and market interest rates). Figure 1.2 illustrates the Simulation Cycle in ProBanker's Competitive Mode. Within a competitive Region, all banks' decisions interact in a competitive simulation. Your Administrator cannot run the simulation until all banks have submitted their decisions. It is therefore imperative that all management teams enter and save their decisions in a timely manner. After the Administrator has simulated the next calendar quarter, the results become available through Reports you access with your web browser. Table 1.1. Autobank versus Competitive Modes of Play Step Autobank Mode Competitive Mode 1 Management team selects a Template and "Cre- Administrator selects starting financial condiates a Game" from it. (See Section 2.3.) tion for all banks in the "economy." Each management team controls a single bank. 2 Each player or team generates reports from the quarter just simulated, and assesses their bank's condition. Each player or team generates reports from the quarter just simulated, and assesses their bank's condition. 3 Players make decisions and save them to the ProBanker website's database. Players make decisions and save them to the ProBanker website's database before the Administrator's announced deadline. 4 Players simulate the next quarter: the costs, revenues, loan demands, and deposit supplies resulting from their decisions. Each bank competes against pre-programmed competitors. At a pre-announced time, the Administrator simulates the next quarter: the costs, revenues, loan demands, and deposit supplies resulting from Player decisions. Players may not run a simulation in Competitive Games. 5 Begin another cycle: return to Step 2. Begin another cycle: return to Step 2. 2 Introduction Usually, you will compete in Competitive Mode for a number of simulated quarters. Each period's decisions have implications for the future. Prior to at least some simulation periods, your Administrator will provide a news bulletin or economic forecast containing information that should affect your subsequent decisions. Table 1.1 compares the Autobank and Competitive simulation cycles. At this point, if you are anxious to starting playing ProBanker, download the Player's QuickStart Guide from the player's Main page. (Click the "QuickStart" link on the navigation bar along the screen's left side.) That Guide provides you the bare essentials for making decisions and simulating your own bank. If you have a bit of patience left, read on... 1.2. Managing a Bank: The Basics Some of you may already have some feeling for what it means to manage a financial institution. Others may have almost no idea at all! Before we go any further, let's level the playing field a bit by providing an overview of the problems associated with managing a banking firm. We'll keep the institution very simple, and build up the various types of decisions you will need to make in ProBanker. Table 1.2. Basic Bank Balance Sheet BabyBank, NA Assets Loans G-Bonds Liabilities Deposits Equity BabyBank, NA has one generic type of loan and one generic type of deposit. It funds an asset portfolio composed of Loans and Government Bonds ("G-Bonds") with Deposits and Equity capital. For now, ignore any noninterest operating costs, loan losses, income taxes, or leverage decisions. Just think about loan and deposit rates. More customers will borrow if the loan rate is lower. The bank therefore has an important decision to make about what loan rate to charge. At a higher loan rate, each dollar lent is more profitable, but not many people take out loans. At a lower loan rate, each dollar lent returns only a small profit, but many people borrow. Dollars of deposits also respond to interest rates: the bank's rate paid on deposits affects the volume of deposit dollars it gathers. Offering a higher deposit rate tends to generate higher deposits (and vice versa, of course). G-Bonds differ from loans and deposits. Rather than setting an interest rate on bonds, the bank can only choose the quantity of bonds to buy. Bonds are available to a bank in perfectly elastic supply. That is, the bond yield remains fixed no matter how many G-Bonds a bank buys. Why do banks purchase GBonds? To simplify a bit, the securities (G-Bond) portfolio largely offsets imbalances between the demand for bank loans and the volume of deposits supplied to them. Finally, Equity is the shareholder's capital. Shareholders paid in some capital when the bank was initially formed (or in conjunction with subsequent "seasoned equity issues"), and the bank has retained some of its earnings. Equity's claim on bank earnings is the residual -- what is left from loan and bond interest income, after paying the promised rate to depositors: Revenues = Loan interest income + Interest on G-Bonds Expenses = Interest paid on deposits 3 Introduction Profit = Revenues - Expenses Return on Equity (ROE) = Profit / Equity Management is expected to provide a reasonable (risk-adjusted) return on shareholders' invested equity funds. Managers affect profits by choosing what loan rates to charge, and what deposit rates to pay. We can illustrate the main idea by considering just two alternative decision sets. Decision Set "A" Choose the loan rate: If RL = 10% then customers will demand $80 of loans. Choose the deposit rate: If RD = 6% then customers will supply $105 of deposits. Decision Set "B" Choose the loan rate: If RL = 8% then customers will demand $130 of loans. Choose the deposit rate: If RD = 7% then customers will supply $145 of deposits. Assume that the bank has Equity of $25. Then BabyBank's balance sheet will depend on the decisions it makes. Table 1.3. Alternative BabyBank Balance Sheets If BabyBank Chooses Decision Set "A" Assets L = $80 G-Bonds = $50 If BabyBank Chooses Decision Set "B" Liabilities OR D = $105 Equity = $25 Assets L = $130 G-Bonds = $40 Liabilities D = $145 Equity = $25 In each balance sheet, the government bond portfolio serves as the "plug" account: any available funds that are not used for customer loans will be invested in a portfolio of G-Bonds. If the government bond rate is 5%, here are the two banks' annual income statements. Table 1.4. Alternative BabyBank Income Statements If BabyBank Chooses Decision Set "A" Interest Revenue From Loans From Bonds If BabyBank Chooses Decision Set "B" OR ($80)(10%) = $8.00 ($50)(5%) = $2.50 ($130)(8%) = $10.40 ($40)(5%) = $2.00 ($105)(6%) = $6.30 ($145)(7%) = $10.15 $4.20 16.8% $2.25 9.00% Interest Expense On Deposits Profit ROE Which of these decisions (Set "A" or Set "B") makes the shareholders better off? In other words, which Decision Set provides the higher ROE? 4 Introduction It seems clear that shareholders would prefer the BabyBank managers to choose Decision Set "A". This makes their bank smaller, but more profitable. Comparing these two alternative decision sets illustrates some general issues. Higher loan rates attract fewer borrowers Higher deposit rates attract more depositors The size of the Government Bond portfolio adjusts to accommodate the bank's preferred level of loans and deposits 1.3. Managing a Bank: Some Complications A real bank -- and your ProBanker bank -- operates on these same general principles, but some of the institutional complications make it easy to forget the basics. 1.3.1. From Profits to Market Value OK. So BabyBank earns $4.20 this year by choosing Decision Set "A." The equity's book value is $25. How much will the bank's equity be worth in the market? A cash flow's valuation depends on the two things: how much cash is expected each year in the future and the rate at which investors discount those expected cash flows. Suppose investors expect BabyBank to earn the same $4.20 annually, forever. And suppose that they feel 100% sure that profits will be precisely as expected. Then investors should discount BabyBank's expected future cash flows at the riskless (G-bond) rate. If the riskless rate of interest is 6%, the value of this perpetual cash flow is $4.20/(0.06) = $70.00. If there are twenty shares of stock outstanding, then, each share is worth $4.20. Notice that a change in the Government Bond rate of interest will change BabyBank's share price, unless the bank's earnings also change in the same direction as the interest rates do. Now introduce uncertainty. Investors are no longer certain that BabyBank will earn $4.20 yearly, although that remains their expected cash flow. Now the appropriate discount rate may be higher than the government bond rate -- let's say its 250 basis points above the G-bond rate, or 8.5%. Under this circumstance, the bank will be worth $4.20/(0.085) = $49.41, or $2.47 per share. This calculation shows that an increase in perceived riskiness can lower a firm's market value. This is why managers are reluctant to report widely-fluctuating earnings: it makes investors nervous about future prospects, and they discount the firm's expected future cash flows more highly. What else affects market value? One of the big effects on market value is the rate at which the firm's earnings are expected to grow in the future. So far, we've assumed that the growth rate is zero. By contrast, let's leave the discount rate at 8.5% and compute the value of BabyBank under the assumption that its earnings grow 2% per year forever. The bank's market value is now $4.20/(0.085-.02) = $64.615. Once growth is expected to be 2% annually, BabyBank's share value will fall if profits grow less quickly, and rise if profits grow faster. To review: we have identified four things that affect a bank's market value (stock price): 1. The level of expected future cash flows. That is, profits. 2. The growth rate of expected future cash flows. That is, profit growth. 3. The level of riskless interest rates in the economy. 4. Investors' required risk premium (above the riskless rate) for BabyBank's future cash flows. 5 Introduction Of these four influences, bank managers can control #1 and (maybe) #2 most directly. Via smooth earnings and dividend flows, they can also affect #4 -- the discount rate investors apply to BabyBank's earnings -- a little bit. Of course, an individual bank's managers have no control over the level of interest rates in their economy. What does this mean for ProBanker? You need to concentrate on earning high and stable profits, in order to provide your shareholders with the best return on their invested capital. Now we use the bank balance sheet associated with Decision Set A to illustrate some of the finer points about bank profitability. 1.3.2. Operating Costs In addition to interest earnings and interest expenses, a real bank's income statement has operating costs, or "noninterest expenses." For example: Banks pay loan officers to make and monitor loans. Banks provide depositors with services in addition to paying explicit interest. Buying and selling government bonds generates transaction (brokerage) costs. Let's approximate operating cost as a constant proportion of the associated dollar balances. Suppose that: Loans cost 0.5% per year to make and to manage, deposits cost 0.25%, and government bonds cost 0.1%. Further assume that BabyBank continues to set the same loan and deposit rates, even though this would probably not be optimal. Then the previous income statement (see Table 1.4) is now revised to include "Noninterest Expense" as shown in Table 1.5. Table 1.5. Revised Income Statement, to Include Noninterest Expenses If BabyBank Chooses Decision Set "A" Interest Revenue From Loans From Bonds ($80)(10%) = $8.00 ($50)(5%) = $2.50 Interest Expense On Deposits ($105)(6%) = $6.30 Noninterest Expense Account Costs ($80)(0.5%) + ($105)(0.25%) + ($50)(0.1%) = $0.7125 Profit ROE $3.4875 13.95% Obviously, higher operating costs reduce profits, and hence BabyBank's share price. Conversely, cost savings raise share price (other things the same). (See ProBanker Economics Lesson: How to Maximize Bank Profits, which you can download from your Help Page at the ProBanker Web site.) 6 Introduction 1.3.3. Loan Losses Although Government Bonds are free from default risk, most loans to private parties are not. If this bank's loans are risky, we over-state its profitability by failing to recognize those possible losses. Suppose that 0.3% of all loans do not pay anything back to the bank. Then we'd have an additional line in the income statement, as shown in Table 1.6. Table 1.6. Revised Income Statement, to Include Noninterest Expenses and a Provision for Loan Losses If BabyBank Chooses Decision Set "A" Interest Revenue From Loans From Bonds ($80)(10%) = $8.00 ($50)(5%) = $2.50 Interest Expense On Deposits ($105)(6%) = $6.30 Noninterest Expense Account Costs ($80)(0.5%) + ($105)(0.25%) + ($50)(0.1%) = $0.7125 Provision for Loan Losses ($80)(0.3%) = $0.24 Profit ROE $3.2475 12.99% 1.3.4. Reserve Requirements Banks generally hold a certain amount of cash (or deposits at other banks) for each dollar of their deposit balances. Bank supervisors require some of these reserves, but banks also hold some reserves voluntarily for business reasons. These funds are sometimes called "sterile reserves" because they earn no interest. Holding cash reserves reduces the bank's capacity to invest in interest-earning assets. Return to the balance sheet generated by Decision Set "A" in Table 1.3 and suppose that the bank must hold 4% of its deposits in the form of cash assets. Then the revised balance sheet would be as it appears in Table 1.7. Table 1.7. Revised Balance Sheet, to Include Cash Reserves BabyBank Chooses Decision Set "A" Assets Liabilities Cash reserves = ($105)(4%) = $4.20 Deposits = $105 Loans = $80 G-Bonds = $130-$80-$4.20 = $45.80 Equity = $25 Compare the asset side of Table 1.7 to the left half of Table 1.3: bonds have fallen to "make room for" the cash reserves. The associated income statement (Table 1.8) shades the places where reserve-holding has affected profits. 7 Introduction Table 1.8. Revised Income Statement, to Reflect Cash Reserves If BabyBank Chooses Decision Set "A" Interest Revenue From Loans From Bonds ($80)(10%) = $8.00 ($50)(5%) = $2.29 Interest Expense On Deposits ($105)(6%) = $6.30 Noninterest Expense Account Costs Provision for Loan Losses ($80)(0.5%) + ($105)(0.25%) + ($50)(0.1%) = $0.7125 ($80)(0.3%) = $0.24 Profit ROE $3.0375 12.15% 1.3.5. Advertising The preceding balance sheets and income statements are all based on a fixed demand curve for loans and supply curve for deposits. The bank's marketing department tries to shift these curves so the bank can attract a greater volume of loans at any given loan rate charged and a greater volume of deposits at any given deposit rate offered. Let's return now to the very simplest case, before we introduced operating costs, loan losses, or reserve requirements. The balance sheet on the left in Table 1.9 is just copied from the very first one presented above. On the right, we assume that an advertising campaign can generate more deposit and loan business at the same interest rates. Table 1.9. Effect of Advertising on Balance Sheet in Table 1.3, Given Decision Set "A" Decision Set "A" WITHOUT advertising Assets L = $80 G-Bonds = $50 Decision Set "A" WITH advertising Liabilities OR D = $105 Equity = $25 Assets L = $120 G-Bonds = $30 Liabilities D = $125 Equity = $25 Will advertising make the shareholders better off? Table 1.10 displays the bank's two pro forma annual income statements. If advertising were free, the bank would clearly prefer to advertise: its shareholders would earn $6.00 per year instead of $4.20. But, of course, there's no free lunch. Advertising must be paid for. What is the largest budget BabyBank should provide to its Marketing Department? The effect of advertising on Profit is $1.80, so any expenditure up to this amount improves the bank's profitability (assuming that advertising has no effects beyond this one time period). In ProBanker, as in this simple example, advertising and account interest rates complement one another. As a bank CEO, you can attract new loan customers by charging a lower rate or through more marketing. Similarly, you can attract more deposit customers by raising the deposit rate or by advertising. The 8 Introduction key to profitability is finding the combination of these two tools that produces the greatest net benefit for your shareholders. Table 1.10. Effect of Advertising on Income Statement, Given Decision Set "A" (compare to Table 1.4) Decision Set "A" WITHOUT advertising Interest Revenue From Loans From Bonds Decision Set "A" WITH advertising OR ($80)(10%) = $8.00 ($50)(5%) = $2.50 ($120)(10%) = $12.00 ($30)(5%) = $1.50 ($105)(6%) = $6.30 ($125)(6%) = $7.50 $4.20 $6.00 - Ad Cost Interest Expense On Deposits Profit 1.4. How to Use This Manual After you register on the ProBanker website you will have access to this manual. It is available online within your account, via the [Help] button on your menu bar. Registered users can also download a PDF version of this manual, again available as an option after you click the [Help] button from within your ProBanker account. As described in Section 2.8, that version can be printed or read/searched on the screen, using the (free) Acrobat Reader, which can be downloaded from www.adobe.com [http://www.adobe.com/products/acrobat/readstep.html]. The remainder of this manual has five chapters and two appendices. First, we tell you how to interact with the ProBanker program. Chapter 2 explains how to access the software generate reports about your bank's condition and the broader economic environment, export this report information to other program applications. "turn back the clock" in Autobank Mode, and submit your quarterly decisions in Competitive Mode. The next two chapters explain the economic and financial features of your ProBanker financial institution. Chapter 3 provides an overview, and then Chapter 4 describes in detail how each account behaves. Chapter 5 then explains how your quarterly managerial decisions affect bank profits and market value. Chapter 6 presents a set of analytical tools and tips, which should help you understand how to enhance your shareholders' wealth. Appendix A summarizes and re-presents some of ProBanker's most important concepts and issues, in the form of Frequently Asked Questions (FAQs). Appendix A presents no new information, but rather organizes the same information a bit differently. We hope this presentation complements the understanding you gain from reading the other chapters. Finally, Appendix B provides a set of sample reports for you to peruse. Even though the ProBanker simulation environment is considerably simpler than a real bank, it is still a complex, inter-related financial system. You should not expect to comprehend it fully after reading this manual only once. Rather, you will find it best (and, in the long run, easiest) to read through the manual once quickly, and then play Autobank for a while. As you work your way through the menus and decisions offered by Autobank, make a list of the things that puzzle you. Then return to the Player's Manu9 Introduction al for another reading. Please(!) resist the temptation to "pick up what I need to know as I go along." You must be quite familiar with how ProBanker works before you can really learn much from your simulation experience. Your ProBanker efforts should be "front-end loaded": as simulation periods pass by, you will be understanding more and more, in less and less time. Rest assured, however, that you will continue to find new things to learn even after many simulated periods. Finally, a word about computer literacy. The ProBanker interface should be accessible even to people with limited experience with Internet applications. Operating ProBanker therefore requires only minimal computer skills. However, your ability to analyze performance and to write cogent reports about your managerial experience will be enhanced if you utilize ProBanker's ability to export output files to a spreadsheet or word-processing program. The ProBanker simulation poses serious financial problems for you to solve -- but it is also supposed to be fun. Good luck! 10 Chapter 2. Operating the Player Software ProBanker is played entirely over the Internet, using a standard browser. You don't need to install any special software on your computer, and you can access ProBanker and your bank's records anytime, from any place in the world. ProBanker has tested successfully with Internet Explorer (ver. 4.0 and above), Netscape (ver. 4.0 and above), Opera (ver. 6.01 and above), and Mozilla (ver. 1.1 and above). Although all these browsers work fine, we have found that early (ver. 4.x) versions of Netscape tend to load some of the web pages more slowly than the others. 2.1. Registering to Use Probanker When you first connect to www.probanker.com [http://www.probanker.com] you will be offered several choices: If you are reading this manual, you no longer need the Tour. So choose [Log In], which leads to: Your Administrator should have provided you with an initial Name and Password. (Don't spend a lot of 11 Operating the Player Software time memorizing these, since you'll be able to change both of them shortly.) Enter these two words in the appropriate places and click [Log In]. After successfully logging in, you will probably come to "Paying for ProBanker," where you have four alternatives: Initially, you will be provided with a few free logins. Clicking that radio button and [Continue] moves you directly into playing the game. Eventually, you will need to pay for the right to use ProBanker in your course, and this payment can be made either online (via credit card) or by mail (via a check or money-order). If you pay early, you'll be entered in your Administrator's database sooner, and you can change your login information to something more personal. We also have a liberal Refund Policy: Refund Policy ProBanker will refund your payment in full if you withdraw from your current course. To request a refund: (a) send a message to refunds@probanker.com [mailto:refunds@probanker.com] stating that you have dropped the course; and (b) be sure to provide your ProBanker UserID and a current mailing address in your e-mail. After confirming your withdrawal status, we will mail you a check for your original payment amount. It's that simple! A "Free Login" login provides you limited access to ProBanker's features: you may download a QuickStart Guide to get you oriented, and you can create and manage Autobanks. Once you have paid, of course, all ProBanker features become available to you. 2.2. Changing Your Profile ProBanker stores a bit of information about you, so your Administrator can identify your bank correctly. To see (and to revise) this information, click [Your Profile] on the left-hand part of your Main Page: 12 Operating the Player Software This link takes you to an information-gathering screen: The most important item to enter here is your name, which identifies you to the Administrator when she or he is assigning banks, recording assignments, and so forth. Some Administrators may also ask for your Student ID number, but this is optional. (If you are playing as a team, your Administrator may suggest how to name yourselves.) To change your initial Username and Password to something more meaningful to you: 1. Enter the new Username you would like to use into the box labeled (surprise!) "Username." Probably, you can have the one you request, but if another player has already taken that name you will be asked to choose a different one. (Note that your Username cannot be the same as any other player's in the ProBanker database. These players extend far beyond your course.) 2. Enter the new Password you would like to use, then enter your new Password again as confirmation. 13 Operating the Player Software 3. Finally, enter your initial password where it asks for "Current Password", and click [Change My Profile]. It's also very useful (to us and to your Administrator) for you to enter an email address, in case we need to contact you on short notice. 2.3. Playing Games After you have paid for ProBanker, logging in takes you directly to the Player's Main Page: Note the three tabs at the top of this page: "Competitive Games," "Autobank Games" and "Templates." Your administrator controls what you see on the Competitive and Template pages. You can initiate your own Autobank games from the Templates provided to you. The "Competitive Game" tab above shows that you are playing in a game called "Official 6905 Bank Game." The bank shown with the "clicked" radio button -- Flannery Bank and Trust -- is the one you have been assigned to manage. Click [Play Game] and you will be taken to this screen: From here, you can enter decisions, save them (see the button at the very bottom of this page on your computer screen), and see reports. We'll return to Reports in Section 2.4 and Section 2.5, and to decision entry in Section 2.6, below. Now go back to the Main Player's Page and click the Templates tab: 14 Operating the Player Software A Template is sort of a bank in "cold storage," which you can convert into an Autobank Game. To make an active Autobank Game for yourself, start with one of the Templates your Administrator has made available on this page: 1. Select your desired Template by clicking its radio button. 2. Then click on [Create New From...]. 3. Name your new Autobank: 4. Click on [Create Autobank]. After creating a new game, your "Autobank Games" tab will list all the games you have available to play: Select a Game's radio button, click on [Play Game], and you will be transferred to the "Game De15 Operating the Player Software cisions"/"Reports" page: Before making decisions, you should examine some Reports about your bank's current condition. 2.4. Generating Reports Reports describe your bank's current financial condition. Use this information as the basis for your decisions in the subsequent quarter. When you first initialize a Game, the reports will describe your bank's condition at the end of "Quarter 0". Your first decisions will affect the bank's performance in Quarter 1. Sample reports are presented in Appendix B, and individual reports are discussed further in Chapter 3 and Chapter 4. For the moment, we'll concentrate on the mechanics of manipulating ProBanker's report windows. Click on the [Reports] tab to see the list of available reports: 16 Operating the Player Software (Not all ProBanker implementations provide the same set of reports. Once again, your Administrator can make some choices, and your Reports page lists only the reports available to players in your economy.) Generate a specific report by highlighting its radio button and clicking [View Report]. The report appears in a new Window, from which it can be printed using your browser's "Print" button, or saved to a disk file in HTML format. You can generate reports about any quarter up to the present one (Quarter 0 is selected in the screen shot). You can also generate a single report for all quarters up to the present: use the pull-down "Select Quarter" menu to highlight "All". 2.5. Downloading Bank Data to a Spreadsheet In addition to printing individual reports for specific quarters, you can download all of your bank's historical data to a file that Excel and other spreadsheet programs will read easily. This format is called "comma-separated values" or CSV. On the "Reports" tab, select the [Download CSV] button at the bottom of this screen to dump your bank's history. The format of these CSV reports is not quite the same as the formats of the reports produced by ProBanker's "Reports" tab, but they are similar and each row has a descriptive label. If you are good with spreadsheets -- or if you need to be good -- you can use these data to analyze your bank's condition at any point in time, or its trends over time. Your Administrator may also provide you with a spreadsheet that produces reports very much like the ones produced for each single period on the "Reports" tab. 2.6. Entering Decisions To input your decisions for the coming quarter, click on [Play Game] in the Player Main Page, to get: When you are first presented with the "Game Decisions" form, its boxes contain the decisions' value from the preceding quarter. (So you don't need to re-enter the decisions you don't want to change.) Each decision variable's description appears in the left-most column, and the range of permissible values is provided just to the right of the entry boxes for the "Upcoming" quarter's decisions. (You can enter a decision outside the permissible range, but ProBanker will not save out-of-range decisions. You must input acceptable values in order to save your decisions and proceed.) The last few columns show the decisions made for previous quarters (only Q0 in the case shown here). When entering decisions, be sure to observe two simple ProBanker conventions: 17 Operating the Player Software All dollar quantities in ProBanker are measured in thousands. (Many real-world banks follow the same convention in their financial statements.) For example, if you purchase "25000" new bonds, you are asking for $25 million worth. An advertising expenditure of "450" means $450,000 per quarter-year. Be careful to specify your dollar magnitudes in thousands of dollars. Interest rates must be entered in "percent." That is, enter 10% as 10.0 (or just 10). Enter "one-half percent" as 0.50. Table 2.1 provides some further information about entering your decisions accurately. Finally, don't forget to save your decisions after you have entered them! The decisions in your bank's data files remain unchanged until you explicitly save a new set of decision values. To save your decisions for the coming quarter, click on the [Save Changes] button located at the very bottom of the "Game Decisions" tab. You can print your current or historical decisions via your web browser's [Print] button. Table 2.1. Summary Information about Entering Decisions Description Affected Decisions Dollar Amounts Decisions # 1 through # 14 are entered in thousands of dollars. So if you wish to issue $100 million of new, 360-day CDs, enter 100,000. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Initial Reserve Allocation Federal Funds Sold Federal Funds Purchased 90-day CDs to issue 180-day CDs to issue 360-day CDs to issue New 8-Quarter Bonds to Purchase Bonds to sell, due start of T+2 Bonds to sell, due start of T+3 Bonds to sell, due start of T+4 Bonds to sell, due start of T+5 Bonds to sell, due start of T+6 Bonds to sell, due start of T+7 Bonds to sell, due start of T+8 15. 16. 17. 18. 19. 20. 21. 22. 23. Fixed rate Corporate Loans Floating Rate Loan Spread Installment Loans Mortgage Loans Retail CDs Passbook Savings IRAs Retail Demand Deposits Corporate Demand Deposits 24. 25. 26. 27. 28. 29. 30. Ads, Installment Loans Ads, Mortgage Loans Ads, Retail Demand Deposits Ads, Corporate Demand Deposits Ads, Retail CDs Ads, Passbook Savings Ads, IRAs Rates Decisions #15 - #23 are the interest rates you charge on loans or pay on deposits. Enter 7% as 7.5. (Your Administrator may limit the deposit rates you may set -- see the Economic Environment Report for current information.) Advertising Decisions #24 - #30 are the quarterly advertising budgets you wish to direct at each of the indicated account types. Remember (again) that the decisions are expressed in thousand dollars. So enter "fifty thousand" as 50. Share Sales Adjust your equity capital account by issuing new shares (enter a positive number here), or repurchasing 18 31. Number of Shares to sell Operating the Player Software Description Affected Decisions shares from the market (enter a negative number here). Provision for Loan Losses (PLL) The amount, in thousand dollars, that you wish to add to your bank's Loan Loss Allowance account. This entry reduces your reported net income. 32. Provision for Loan losses Corporate Loan Standard (CLS) In making Fixed Rate and Floating Rate corporate loans, you can choose to have a high credit standard (indicated by a decision of +1), an average standard (decision of 0), or a low credit standard (-1). 33. Corporate Loan Standard Dividends The value, in thousands of dollars, of dividends you wish to pay to all outstanding shares. (This is not a dividend per share.) 34. Total Dividends Demand Deposit Fees You can charge your demand deposit customers fees for payment services. These fees are expressed here as a percentage of your costs of providing the services. Express these two percentage amounts the same way as you expressed loan and deposit rates above: "one hundred percent" = 100. 35. % of Cost charged to Retail DD 36. % of Cost charged to Corporate DD 2.7. Using Autobank to Learn About ProBanker Sometimes, you will find it convenient to "re-run history" in Autobank Mode. Maybe you made some terrible decisions and want a fresh start. Alternatively, you might want to simulate alternative loan pricing decisions over the same series of government bond rates. Turn back the Autobank quarter indicator by clicking [Back 1 Quarter] at the bottom of the "Game Decisions" tab. You can go back as many quarters as you like, by repeatedly choosing [Back 1 Quarter]. What if you back up too far? No problem! Since your entire decisions history is permanently stored, selecting [Simulate] at the bottom of the "Game Decisions" tab will replicate whatever initially happened in that quarter. If you wish to go all the way back to your initial condition (at Quarter 0), you can either repeatedly move back one quarter at a time, or you can go the Template tab on your Main page and create a new game from [Create New From...] the same template you started with. Caution You may be tempted to try using Autobank to "check out" the effects of Competitive decisions. Don't bother. This technique fails to give representative results, because your "real" competitors are unlikely to behave the same way as Autobank's pre-programmed competitors do. So don't try to flip back and forth between Autobank and Competitive Games, hoping to learn what will happen in the Competitive environment from an Autobank simulation. Use Autobank to learn about ProBanker, then switch over to the Competitive environment permanently. 2.8. Help 19 Operating the Player Software You can view ProBanker's Player Manual online, or download it (in pdf format) by selecting [Help] on the Player's Home Page, which opens a new browser instance displaying: Whenever you are connected to the ProBanker site, the [Help] button on the Player Main Page brings up this table of contents for the Player's Manual. Within this help browser, the menu bar on the left-hand side guides you through several documentation options. First, you can download a printable (.pdf) version of the manual (zipped) by clicking on the "Entire Manual" link. By saving the entire Player's Manual on your hard drive, you can read and search it with the (free) Adobe Acrobat Reader, even when you are not