QUESTION CINE (15 marks) Savings Bank Ltd. Balance sheet As at 31f12013 assets $(000) l[lash 1001000 Ioveshneuts 260,000 Lo ans $300,000 Other 401000 Total 1,100,000 Liab. 3: Equity $(000) Payables 60,000 Deposits T00,00-0 Longterm bonds 200,000 Equity 140,000 1,100,000 The investment portfolio comprises private equity {20%}, a corporate zero coupon bond (30%), government bonds [40] and shares in publicly traded companies {10%). The loan portfolio has 5% delinquency and the average return is 6.5%. Deposits are primarily short term. The renewal rate is declining and expected to continue into the medium term. The average deposit rate is 2.5%. Interest rates are expected to rise in the short term. A Based on the balance sheet and the information above, identify three risks facing the bank? Explain. (5 marks) E Recommend to management one strategies to reduce each risk (5 marks) C Discuss the bank's capital adequacy based on the information given (3 marks) QUESTION TWO (13'r marks) A Discuss briey the potential impact of domestic economic decline on banks 1with large domestic credit exposlne focusing on the four areas belowr : 1. Asset quality ii. l[Capital iii. Revenue iv. Share price