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Challenge Problem This problem focuses on bank capital management and various capital ratio measures. Following are recent balance sheet accounts for Prime First National Bank. Cash assets $ 17 million Demand deposits $50 million Loans secured by Time & savings real estate 40 deposits 66 Commercial loans 45 Federal funds purchased 15 Government Trust-preferred securities owned 16 securities 2 Goodwill 5 Bank fixed assets 15 Owners' capital 5 Total assets $138 million Total liabilities $138 million and owners' capital All amounts are in millions of dollars. Note: The bank has loan-loss reserves of $10 million. The real estate and commercial loans shown on the balance sheet are net of the loan-loss reserves. a. Calculate the equity capital ratio. How could the bank increase its equity capital ratio? b. Risk-adjusted assets are estimated using the following weightings process: cash and government securities .00; real estate loans .50; commercial and other loans 1.00. Calculate the risk-adjusted assets amount for the bank. c. Calculate the Tier 1 Ratio based on the information provided and the risk-adjusted assets estimate from Part b. d. Calculate the Total Capital (Tier 1 plus Tier 2) Ratio based on the information provided and the risk-adjusted assets estimate from Part b. e. What actions could the bank management team take to improve the bank's Tier 1 and Total Capital ratios?
Make a personal retirement plan suppose that you'll retire at the age of 65. The plan should specify the amount of money you need to retire, your longevity, and the monthly amount after retirement so that you and your spouse can lead a comfortable li..
How is a lessee's capital lease similar to, and different from, purchasing the equipment using the proceeds of a loan repayable in installments?
If D0 = $2.00, g = 6% and P0 = $40, what is the stock's expected total return of the coming year?
What property is included in the estate tax? Also, what are the deductions and credits included in this tax?
You own a stock portfolio invested 35 percent in Stock Q, 20 percent in Stock R, 30 percent in Stock S, and 15 percent in Stock T. The betas for these four stocks are 0.77, 1.15, 1.16, and 1.33, respectively. What is the portfolio beta?
Jack's Construction Co. has 100,000 bonds outstanding that are selling at par value. The bonds yield 9.5 percent. The company also has 4.0 million shares of common stock outstanding. The stock has a beta of 1.2 and sells for $55 a share. The U.S. Tre..
Valuation - corporate bond A $1,000 corporate bond with 20 years to maturity pays a coupon of 7% (semi-annual) and the market required rate of return is a) 6.6% b) 13%. What is the current selling price for a) and b)?
The earnings per share have increase at a constant rate and will continue to do so in the future. Dividends represent 30 percent of earnings.
Norville Creations wants to get an after-tax profit of $45,000 for the year ended December 31, Year 1. The corporation sells its product for $35 per unit and has a contribution margin ratio of 15 percent.
Buchanan Corp. is refunding $12 million worth of 10% debt. The new bonds will be issued for 8%. The corporation's tax rate is 35%. The call premium is 9%. What is the net cost of the call premium?
Objective type questions on investment and When interest rates are high and lenders may not want to make loans because of
Suppose there are two firms operating in the same industry. The two firms are almost identical. The only difference is their capital structure. Firm UU has only equity while firm LL has 30% of debt and 70 percent of equity.
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