6. Zebra Group holds total assets of $25 billion and equity capital of $2 billion and...

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6. Zebra Group holds total assets of $25 billion and equity capital of $2 billion and has just posted an ROA of 0.95 percent. What is the financial firm's ROE? Alternative scenarios: a. Suppose Zebra Group finds its ROA climbing by 25 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 25 percent. If total assets and equity capital hold their present positions, what change will occur in ROE? c. If ROA at Zebra Group remains fixed at 0.95 percent 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 0.95 percent) affect the bank's ROE? 6. Zebra Group holds total assets of $25 billion and equity capital of $2 billion and has just posted an ROA of 0.95 percent. What is the financial firm's ROE? Alternative scenarios: a. Suppose Zebra Group finds its ROA climbing by 25 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 25 percent. If total assets and equity capital hold their present positions, what change will occur in ROE? c. If ROA at Zebra Group remains fixed at 0.95 percent 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 0.95 percent) affect the bank's ROE?

Answer rating: 100% (QA)

Solution To calculate the ROE Return on Equity we can use the formula ROE ROA Equity Multiplier Equi... View the full answer