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Given the information below for a bank, what is the Return on Equity? (ROE). Original Interest...

Given the information below for a bank, what is the Return on Equity? (ROE).
Original
Interest income 2,250
Interest Expense 1,500
Total assets 45,000
Security losses or gains 21
Earnings assets 40,000
Total liabilities 38,000
Taxes paid 16
Common shares outstanding 5,000
Noninterest income 800
Noninterest expense 900
Provisions for loan losses 250
A.

8.06%
B.

9.59%
C.

5.79%
D.

6.5%
E.

4.9%

Solutions

Expert Solution

Return on Equity=Net income/Total equity

Net income=Interest income-Interest expenses+security gains/losses-Taxes paid+Non interest income-Non interest expesnes-provisions for loan losses=2250-1500+21-16+800-900-250=405

Total equity =total assets-Total liabilities=45000-38000=7000

Return on equity=405/7000=5.79%

Option C is correct

jeff jeffy answered 3 years ago
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