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Calculate the return on assets

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Reference no: EM131284368

1.Consider a commercial bank with assets of $2,000 million ($2billion) and liabilities of $1,700 million. The bank's after-tax earnings are $30million.

A. Calculate the returnon assets (ROA), the return on equity (ROE), the leverage ratio, and banks capital as a percent of assets.

B. Suppose the capital requirement were 8%and the bank increased its asset holdings, financed entirely by credit, toexactly meet the capital requirement. Assuming the ROA does not change, what is the new ROE and leverage ratio?

Reference no: EM131284368

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