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1. Cimarron State Bank reports the following items on its balance sheet: cash = $200 million; U.S. government securities = $150 million; residential real estate loans = $300 million; and corporate loans = $350 million. Its off-balance-sheet items include standby credit letters backing the issue of state and local government general obligation bonds = $20 million, and long-term credit commitments to corporations = $160 million.
a. What are Cimarron State’s total risk-weighted assets? If the bank reports Tier 1 capital of $30 million and Tier 2 capital of $20 million, does it have a capital deficiency?
b. Now, assume Cimarron State Bank reports that they have entered into a 5-year interest rate swap with a notional value of $50 million. What is the risk weighted asset amount for the swap?
You are analyzing the after-tax cost of debt for a firm. You know that the firm’s 12-year maturity, 10.75 percent semiannual coupon bonds are selling at a price of $814.61. If these bonds are the only debt outstanding for the firm. What is the curren..
First compute the APV, then compute the capital structure in ratios, and finally show that the WACC yields the same result.
Carry-ALL plans to sell 1,300 carriers next year and has budgeted sales of $46,000 and profits of $22,000. Variable costs are projected to be $20 per unit. Michael Co. offers to pay $23,900 to buy 680 units from Carry-ALL. Total fixed costs are $7,00..
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Why is the money market mutual fund industry so important? If money market mutual funds have problems, can't savers just deposit their money in banks?
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Abbott Lab made $2.80 net income per share last year and paid out $1.30 in dividend. The company had a book value (or equity) per share of $20. The market has a risk free rate of 3.1% and market return 11.1%. What’s the discount rate using CAPM? Ca..
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