1. There are three banks in East City. First National Bank, which currently holds 40 percent of the deposits in the area, Second State Bank, which currently holds 30 percent of the deposits, and New State Bank and Trust, which also holds 30 percent of the deposits . What is the Herfindahl-Hirschman Index for East City?

2. There are three banks in East City. First State Bank which currently holds 25 percent of the deposits in the area, Second State Bank which currently holds 40 percent of the deposits, and Third State Bank which holds the remainder. What is the Herfindahl-Hirschman index for East City (calculate Third State Bank's share first)?

3. First National Bank shares are currently selling for $40 per share and the bank recently reported earnings per share of $4.50 on its 200,000 shares outstanding. Second National Bank has 150,000 shares outstanding, with a current market price of $30 per share. You just reported earnings per share of $5. If First National acquires Second National in a stock purchase, with the two banks agreeing to exchange shares at current market prices, and post-merger earnings are expected to be $1,800,000, what is the expected post-merger EPS? ?

Answer rating: 100% (QA)

1 The HerfindahlHirschman Index for East City is calculated as the sum of the squared market shares ... View the full answer