Task: Midterm Assignment (40% of the Final grade) You must answer all the questions in the proposed business case. This task assesses the following learning outcomes: Understanding of Financial institutions, the Balance Sheet of a commercial Bank. Bonds and Bond pricing, Bond yields, Bonds and risk. Interest rates. LAUNCH: August 14th / DELIVERY: August 23", 2020, 23:59HRS via Turnitin on Moodle Submission file format: Excel document with all the answers, clearly identifying all steps, results, including comments besides each answer. 1. (35 Points) Assume that the following banks have the same Net income of 2 million, but they are different due to the capital structure: BANKA Reserves 960 Deposits 6800 Loans 7200 Bank Capital 1360 Total assets 8160 Total Liabilities and Equity 8160 BANK B Reserves 960 Deposits 8000 Loans 7200 Bank Capital 160 Total assets 8160 Total Liabilities and Equity 8160 Which Bank is more attractive for shareholders? And why? b. Which bank is riskier in case of loan depreciation at 200 million? Show your calculations to support your suggestions Find ROA and ROE for the two banks 2. (35 Points) Suppose there are two bonds you are considering: Bend A Bond Maurity years) Annual Coupon rate (6)6 Par Value 1000 1000 a. If both bonds had a required rate of return of 4%, what would the bonds prices be? b. Re-calculate the prices of the bonds if the required return falls to 9%. Could you explain why the price increases or decreases given this change in required return? c. After one year the required return is 5%, recalculate de new prices for both bonds and find the return that the investors had for bond A and for Bond B. (10 Points) Which of the following would be more valuable to you: a portfolio of stocks that rises in value when your income rises or a portfolio of stocks that rises in value when your income falls? Why? 4. (10 Points) Commercial banks, insurance companies, investment banks, and pension funds are all examples of financial intermediaries. For each of these, give an example of a source of their funds and an example of their use of funds. 5. (10 Points) David and Daniel purchase identical houses for S1000000. David makes a down payment of 200000 while Daniel only puts down $100000; for each individual, the down payment is the total of his net worth. Assuming everything else equal, who is more highly leveraged? If house prices in the neighborhood immediately fall by 10 percent (before any mortgage payments are made), what will happen to David's and Daniel's net worth? 1) Find which is the cash balance and identify the rest of accounts expressing by marking with an X if it is an Asset, a Liability, Revenue or expense. (40 points) Til Balance Epense Couts of Good Unis expense 3.500.000 Accounts Payable Notes PayOST 10 000 DO Prepaid surance 1501000 Property plant and super 500 IT Der Comm Stock 5.000 DOO Rant per 1.000.000 corsang expenses Notes Payabio LT 2116 Petared aming Depreciation interest 4.170.100 Salaries per 15.000.000 Insurance expense 1.500.000 3136100 Accounts receive 500 Inventories Once is 199 Total 2) Business Case 60% Daniel, opened a retail nuts store on December 1, current year. The following are the business transactions for December. Daniel invested 250,000 cash in the business in exchange for 1,000 shares of capital stock. A stone was purchased for 500,000. A cash payment of 80,000 was made at the time of the purchase, and a note payable was issued for the remaining balance. The mote has an interest expense of 6% annual to be paid at the end of each year. Office furniture was purchased for 45,000 case. The fumiture is planned to be replaced for new in 5 years Dec. Dec. 4 Dec. 9 time Dec. 10 Dec. 15 Dec. 16 Acquired 1000Ks of pistachios for Socach. The invoice is dae in 15 days Contracted and paid an insurance policy for the next year, until Dec 15 of next year, for an amount of 12.000 Sold 300 kg of pistachios at a price of 100 per kg A ESSO invoice was received for several legal consulting fees placed in December. The entire amount is due on January Paid employees 2.200 for salaries camed in December Dec. 27 Dec. 31 1. Prepare journal entries (including explanations) for each transaction and T accounts. 2. Prepare a Trial Balance. 3. Is the company profitable according to your knowledge