Problem 6 (12 points): Bank has 30 billion in cash at the Central Bank, 150 billion in loans and 40 billion in non-inflation linked government bonds. The Bank has issued senior bonds amounting to 70 billion and subordinated long-term bonds amounting to ISK 30 billion to finance the bank. The equity is 20 billion and other financing is through deposits. a) b) c) Prepare a balance sheet What is the equity multiplier of the bank (Total assets/Total equity)? The bank receives 7% interest on state bonds, 10% interest on the loans, and pays 5% interest on deposits. The Bank pays 6% on its own senior bonds and 10% on its long-term subordinated bonds. What is the return on assets and equity? The Bank needs to refinance half of their issued own senior bonds, but financial conditions have deteriorated by 200 points. Increased competition has resulted in increased payment of 100 basis points interest on deposits. What is the return on assets and equity now? One company that the bank had lent 20 billion is defaulting and cannot pay the loan back. The Bank receives 25% from its claim. Show updated balance sheet. Is the bank operational based on the CAD ratio (risk weight of loans is 100% but 0% for both the cash and the marketable securities)? d) e)