What change will occur in roe

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Question: Blue and White National Bank holds total assets of $1.69 billion and equity capital of $139 million and has just posted an ROA of 1.10 percent. What is the bank's ROE? Alternative scenarios:

a. Suppose Blue and White Bank finds its ROA climbing by 50 percent, with assets and equity capital unchanged. What will happen to its ROE? Why?

b. On the other hand, suppose the bank's ROA drops by 50 percent. If total assets and equity capital hold their present positions, what change will occur in ROE?

c. If ROA at Blue and White National remains fixed at 0.0076 but both total assets and equity double, how does ROE change? Why?

d. How would a decline in total assets and equity by half (with ROA still at 0.0076) affect the bank's ROE?

Reference no: EM131717480

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