Question 1 Bank 1 1 2 2 3 3 Table 1 Bank Profits and Equity Capital Year ROA ( ) 2019 4 2020 2 5 2019 3 2020 2 2019 1 2020 2 Capital ( ) 10 12 9 12 13 11 Table 1 reports data on profitability and capital ratios for three banks in 2019 and 2020 ROA denotes the return on assets and measures profitability Capital is the ratio of equity capital to assets Both variables are measured in per cent a) Using the data in Table 1, estimate the equation ROAit Be B Capitalit Eit (1) b) How would you interpret the coefficient estimates Question 1 Bank 1 1 2 2 3 3 Table 1 Bank Profits and Equity Capital Year ROA ( ) 2019 4 2020 2 5 2019 3 2020 2 2019 1 2020 2 Capital ( ) 10 12 9 12 13 11 Table 1 reports data on profitability and capital ratios for three banks in 2019 and 2020 ROA denotes the return on assets and measures profitability Capital is the ratio of equity capital to assets Both variables are measured in per cent a) Using the data in Table 1, estimate the equation ROAit Be B Capitalit Eit (1) b) How would you interpret the coefficient estimates

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Question 1 Bank 1 1 2 2 3 3 Table 1  Bank Profits and Equity Capital Year ROA ( ) 2019 4 2020 2 5 2019 3 2020 2 2019 1 2020 2 Capital ( ) 10 12 9 12 13 11 Table 1 reports data on profitability and capital ratios for three banks in 2019 and 2020  ROA denotes the return on assets and measures profitability  Capital is the ratio of equity capital to assets  Both variables are measured in per cent  a) Using the data in Table 1, estimate the equation ROAit   Be   B  Capitalit   Eit    (1) b) How would you interpret the coefficient estimates  Question 1 Bank 1 1 2 2 3 3 Table 1  Bank Profits and Equity Capital Year ROA ( ) 2019 4 2020 2 5 2019 3 2020 2 2019 1 2020 2 Capital ( ) 10 12 9 12 13 11 Table 1 reports data on profitability and capital ratios for three banks in 2019 and 2020  ROA denotes the return on assets and measures profitability  Capital is the ratio of equity capital to assets  Both variables are measured in per cent  a) Using the data in Table 1, estimate the equation ROAit   Be   B  Capitalit   Eit    (1) b) How would you interpret the coefficient estimates

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Question 1 Bank 1 1 2 2 3 3 Table 1: Bank Profits and Equity Capital Year ROA (%) 2019 4 2020 2.5 2019 3

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