PRACTICE PROBLEMS 1. Compute and compare ROA and ROE for the following banks: $100 Deposit 5% Equity Loan 790 $70 S30 Total Assets $100 Bank B $100 Deposit 5% Equity Total Liabilities and Loan 790 $90 $10 $100 Bank C $100 Deposit 3.888% $90 $10 Total Liabilities and $100 Loan 7% Equity Total Assets $100 2. Derive and explain each component of the return on equity model? Regulators use the CAMELS system to analyze bank risk. What does CAMELS stand for and what financial ratios might best capture each factor? 3. What are the primary sources of risk that depository institution managers face? Describe how each risk type potentially affects performance. Provide one financial ratio to measure each type of risk and explain how to interpret high vs. low values. 4