Suppose Bank A's stock price is $75 and Bank B's stock price is $25. Bank A is planning to purchase Bank B by paying Bank B's shareholders a bonus of $10 per share. 4. What is the merger premium that Bank B's shareholders will receive?

5. If Bank B has 100,000 shares outstanding, how many shares of Bank A will the shareholders of Bank B receive?

6. Second National Bank is forecasting a return on equity of 15 percent for this year. The board of directors wants to maintain its current policy of paying the bank's stockholders 40 percent of any net earnings the bank will earn. How fast can the bank's assets grow this year without jeopardizing its ratio of capital to assets (i.e., find the internal capital growth rate)?

7. A bank has $100 million in assets in the 0 percent risk-weight category, $200 million in assets in the 20 percent risk-weight category, $500 million in assets in the 50 percent risk-weight category, and $750 million in assets in the 100 percent risk-weight category. This bank has $57 million in core (Tier 1) capital. What is this bank's ratio of Tier 1 capital to risk-weighted assets?

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