Assignment 1A:

Create a personal Autosim.

Click on Games.

Click on New Autosim game.

Select Assignments Regional Bank template in using template. Note: Make sure NOT to choose Sample Regional Bank template.

Type a name for the new Autosim in New games name Assignment 1A

Click on Create Game

Input decisions to your new Autosim. There are five categories of decisions Bank Treasury, Asset-other, Asset-loans, Liabilities-deposits and Bank-general.

In assignment 1A, create an Autosim and purchase $50 million in Federal funds (interbank borrowing) and issue $50 million in negotiable CDs (wholesale deposits). In addition, purchase $15 million in government bonds, set aside $500,000 for loan loss provisions and $25 million for required reserves. Simulate one period and analyze the outcome of the decisions. In assignment 1B, make the same decisions as 1A but also increase advertising on loans and deposits. Compare the results to isolate the impact of increases in advertising.

Click on Autosim games.

Select your newly created Autosim.

Click on Play bank.

Remember click Save before you go to next category.

Bank Treasury change the following:

Federal Funds Purchased (not Sold) = $50,000

360 Days CDs to Issue = $50,000

The remaining boxes should all be zeroes, as shown below.

Assets-other change the following, as shown below:

Planned required reserves = $25,000

New Bonds to Purchase = $15,000

New provision for loan losses = $500

The remaining boxes should all be zeroes, as shown below.

Assets-loans Make no changes, as shown below:

Liabilities-deposits Make no changes, as shown below:

Bank-general Make no changes, as shown below:

Simulate next period (on left side of the screen under Game). After a few seconds, you will notice a flicker and it should say End of Period 1. You are ready to review the results.

Review the results by clicking on Reports. Alternatively, you can download the results from the Excel file Download full reports in Excel.

Answer the following questions:

Estimate the interest income of fixed rate, floating rate, installment and mortgage loans.

Use the income statement and full balance sheet reports. Please remember that interest income is estimated as interest earned over total loans less nonperforming loans.

Compare your results to those reported in the Income Statement Report.

Estimate the NIM, ROA and ROE.

Net interest margin is defined as interest income minus interest expense over total average assets. Interest income should also include interest on all loans and government bonds. Interest expense should include interest on all deposits and discount window advances.

Compare your results to those reported in Performance Comparison Basic report.

You purchased (borrowed) $50 million of 360-day negotiable CDs. The total negotiable CDs in Balance Summary Report increased from $132 million in quarter 0 to $149 million in quarter 1. Explain.

Hint: look at the Balance Sheet Full report. Your most recent purchase is T+4.

Assignment 1B:

Create a personal Autosim.

Click on Games.

Click on New Autosim game.

Select Assignments Regional Bank template in using template. Note: Make sure NOT to choose Sample Regional Bank template.

Type a name for the new Autosim in New games name Assignment 1B

Click on Create Game

Input decisions to your new Autosim. There are five categories of decisions Bank Treasury, Asset-other, Asset-loans, Liabilities-deposits and Bank-general

In this assignment, we will increase our advertising expenses and compare the results to Assignment 1A.

Bank Treasury change the following:

Federal Funds Purchased (not Sold) = $50,000

360 Days CDs to Issue = $50,000

The remaining boxes should all be zeroes.

Assets-other change the following:

Planned required reserves = $25,000

New Bonds to Purchase = $15,000

New provision for loan losses = $500

Assets-loans Double the advertising on Installment Loans and Mortgage Loans

Advertising for Installment Loans: Increase from 150 to 300

Advertising for Mortgage Loans: Increase from 80 to 160

Leave all the rest as is and Save.

Liabilities-deposits Double the advertising on all deposits.

Advertising for corporate demand deposits: Increase 580 to 1160

Advertising for retail demand deposits: Increase 410 to 820

Advertising on retail savings deposits: Increase from 140 to 280

Advertising on retail CDs: Increase from 290 to 580

Advertising on long-term retail deposits: Increase from 60 to 120.

Leave all the rest as is and Save.

Answer the following questions:

Compare the Quarter 1 installment and mortgage loans between Assignment 1B and Assignment 1A?

Compare the Quarter 1 corporate demand deposits, retail demand deposits, retail savings deposits, retail CDs and long-term retail deposits between Assignment 1A and 1B?

Did the increase in advertising in Assignment 1B make a difference? Which loan or deposit was impacted the most? the least?