Question $1$

a$.$ Kiwibank, on its balance sheet, has assets of $$100$m$,$ liabilities of $$75$m and capital of $$25$m$.$ Calculate

the Bank$$s capital ratio and its leverage ratio.

b$.$ Suppose that Kiwibank$$s expected return on assets is $10\%,$ and the expected return on liabilities is $5\%,$

calculate the Bank$$s expected profit. Additionally, calculate the Bank$$s expected return per unit of

capital.