Question

3. Megalopolis Bank has the following balance sheet and income statement.

Balance Sheet (in millions)

Assets | Liabilities and Equity

Cash and due from banks $ 9,000 | Demand deposits $ 19,000

Investment securities 23,000 | NOW accounts 89,000

Repurchase agreements 42,000 | Retail CDs 28,000

Loans 90,000 | Debentures 19,000

Fixed assets 15,000 | Total liabilities $155,000

Other assets 4,000 | Common stock 12,000

Total assets $183,000 | Paid-in capital 4,000

| Retained earnings 12,000

| Total liabilities and equity $183,000

Income Statement

Interest on fees and loans $ 9,000

Interest on investment securities 4,000

Interest on repurchase agreements 6,000

Interest on deposits in banks 1,000

Total interest income $20,000

Interest on deposits $ 9,000

Interest on debentures 2,000

Total interest expense $11,000

Net interest income $ 9,000

Provision for loan losses 2,000

Noninterest income 2,000

Noninterest expenses 1,000

Income before taxes $ 8,000

Taxes 3,000

Net income $ 5,000

For Megalopolis, calculate:

a. Return on equity

b. Return on assets

c. Asset utilization

d. Equity multiplier

e. Profit margin

f. Interest expense ratio

g. Provision for loan loss ratio

h. Noninterest expense ratio

i. Tax ratio

Answer 1