Reference no: EM132620213
A bank has assets of $100M, liabilities of $95M, and $5M of equity capital, and the bank's profit over a given period equals the change in assets minus the change in liabilities. In other words, if ΔA = AEnd - ABeginning , etc., then Profit =ΔA - ΔL.
a. Show that this profit definition is the same as the change in capital (ΔC).
b. Assume asset and liability annual returns are normally distributed with respective means of 0.05 and 0.02, respective standard deviations of 0.15 and 0.04, and that these returns have a correlation of 0.20. What is the mean and standard deviation of annual profit?
c. Regulators want to be 99.9% confident that the bank's equity capital is adequate for potential losses. Does the bank have enough capital with $5 million? If not, how much additional equity capital should regulators require?
NOTE: If $5M is not enough and you have to increase it, then A also increases so you have changed the risk and need another calculation.
|
What is the value of the current assets
: Johnson Co. has total assets of $16,000, net working capital of $3,000, owner's equity of $8,500, and long-term debt of $6,000.
|
|
Role of leadership of creative and innovative efforts
: Consider and analyze the role of leadership of creative and innovative efforts from your own experience.
|
|
Summarize your findings on business reputation on the public
: Ethics are the foundation of successful leadership in business and the reputation of a business is impacted by its leaders' ethical practices.
|
|
What is the break-even point per month in sales dollars
: For the month of July, the marina anticipates sales of $995,300. What is the expected level of profit? What is the break-even point per month in sales dollars?
|
|
What is the mean and standard deviation of annual profit
: Assume asset and liability annual returns are normally distributed with respective means of 0.05 and 0.02, respective standard deviations
|
|
Describe situation to change the leadership style
: Need for Change: Discuss a situation when a leader refused to change their leadership style or did not recognize a need for change in order to achieve desired.
|
|
How events to affect the price receive
: Suppose you are the manager of a California Winery. How would you expect the following events to affect the price you receive for a bottle of wine?
|
|
Advantages for healthcare organizations
: Planning has a number of advantages for healthcare organizations. For instance, planning can help organizations adapt, take advantage of opportunities,
|
|
What is the current direction of the organization
: What is the current direction of the organization or the department? Conduct a quick SWOT analysis to determine areas that offer opportunities for change.
|