Calculate the return on equity for this bank

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Reference no: EM133895477

Assignment:

Section II (each worth 5 points) Answer the questions in the space provided after each question. Show your working in each case.

1) Suppose that a commercial bank has $100 million of assets and that its capital consists of $10 million of equity. In addition, the bank's return on assets is 1 percent. Calculate the return on equity (ROE) for this bank.

2) If, in a particular year, the government ran a budget deficit of $200 billion and the private sector's holdings of government securities increased by $100 billion, what is the likely dollar increase in the monetary base resulting from the budget deficit?

Reference no: EM133895477

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