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Describe the different types of risk, Indicate

Question # 00620469
Subject: Economics
Due on: 11/22/2017
Posted On: 11/22/2017 05:10 AM

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7. (5 points) Briefly describe the different types of risk. Indicate which type of risk is most difficult to quantify and

explain why that is the case.


8. (5 points) What is the return on equity for a bank that has an equity multiplier of 12%, an interest expense ratio of

5%, and a return on assets of 10%?


9. (5 points) Explain why net interest margins have been declining (generally) for several years.


10. (10 Points) Answer each of the following questions related to the financial statements below.

a. What is the ROE?

b. What is the net interest margin?

c. What is the earnings base?

d. What is the burden ratio?

e. What is the efficiency ratio?


4th 2nd National Bank

Balance sheet

Assets

Cash and due from banks $ 125

Investments $ 310

Loans $ 408

Federal Funds $ 22

Premises $ 135

Average total assets $1,000


Liabilities and Equity

Demand deposits $ 225

Federal Funds $ 250

Time Deposits $ 425

Equity $ 100

Average Total Liabilities & Equity $1,000


Income Statement

Interest Income $ 175

Interest Expense $ 133

Non-Interest Income $ 21

Non-Interest Expense $ 49

Net Income $ 14

Tags indicate risk types different equity income points ratio aets expense risk total deposits funds noninterest federal bank average liabilities explain 0 return sheet demand efficiency national balance cash loans statement burden premises time investments

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