QUESTION 3

1. A bank estimates that its total revenues will amount to $155 million and its total expenses (including taxes) will equal $107 million this year. Its liabilities total $4,960 million while its equity capital amounts to $52 million. What is the bank's return on assets? Is this ROA high or low? How could you find out? (4 marks)
2. Nation Bank has posted interest revenues of $63 million and interest costs from all of its borrowings of $42 million. i. If the bank possesses $700 million in total earning assets, what is Nation bank net interest margin? ii. Suppose the banks interest revenues and interest costs double, while its earning assets increase by 50 percent. What will happen to its net interest margin? (4 marks)
3. Why is the return on assets (ROA) is be important to bankings key competitors? (2 marks)