Question: Assets Liabilities Reserves 250 Deposits Required Transaction (checking) deposits 1000 Excess Savings deposits 3000 Loans Money Market deposits 500 Variable rate loans 750

Assets		Liabilities
Reserves	250	Deposits
Required	__	Transaction (checking) deposits	1000
Excess	__	Savings deposits	3000
Loans		Money Market deposits	500
Variable rate loans	750	Time deposits (CDs)
Short-term loans	1600	Fixed rate	500
Long-term fixed rate loans	2000	Variable rate	100
Securities		Borrowing
Short-term securities	500	Fed funds borrowed	0
Long-term securities	600

a) Refer to the bank balance sheet above. Suppose values are in millions of dollars. Suppose return on assets (ROA) is 1.2%. Suppose bank owners convince bank managers to borrow 1000 million from other banks and make more loans. What is the new leverage ratio?

b) Refer to the bank balance sheet above. Suppose values are in millions of dollars. Suppose return on assets (ROA) is 1.2%. Suppose bank owners convince bank managers to borrow 1000 million from other banks and make more loans. Assuming no change in ROA, What is the new value for ROE?

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Question: Assets Liabilities Reserves 250 Deposits Required __ Transaction (checking) deposits 1000 Excess __ Savings deposits 3000 Loans Money Market deposits 500 Variable rate loans 750

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Question: Assets Liabilities Reserves 250 Deposits Required Transaction (checking) deposits 1000 Excess Savings deposits 3000 Loans Money Market deposits 500 Variable rate loans 750