Suppose the Blue Bank has the following balance sheet (in million dollars): ASSETS LIABILITIES Reserves 10 Deposits 87.5 Loans 70 Capital 12.5 Securities 20

a. What is the equity multiplier? b. If the net profit after taxes for this bank is $ 5 million, then what is the return on assets (ROA) and the return on equity (ROE)? c. Suppose that the bank wants to increase ROE by increasing deposits from $87.5 million to $100 million. If the required reserve ratio is 10 %, and if the bank holds only required reserves and loans out of all excess reserves, then how much reserve will the bank have? How much in loans will the bank have? d. If the ROA unchanged after the increase in deposits in part c, what is the new ROE?