Suppose Melvin's Bank starts with the balance sheet in Table 9.4A and the income statement in Table 9.2. Show how the balance sheet and income statement change in each of the following scenarios. Also calculate the new ROA, ROE, and rate- sensitivity gap.

a. The bank issues $20 of new stock and uses the proceeds to make loans.
b. Britt moves $25 from his savings account to his checking account.
c. The bank is hired to manage the assets of a wealthy person, for which it is paid $10 a year.
d. The bank lends $5 of reserves to another bank in the federal funds market. (Assume the federal-funds rate is the same as the Treasury-bill rate.)
e. The bank replaces $10 of its loans with floating-rate loans, which pay the Treasury-bill rate plus 2 percent.

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(A) Initial Balance Sheet (B) Balance Sheet After $50 Withdrawal Assets Liabilities and Net Worth Assets Liabilities and Net Worth Reserves 10 Checking Deposits Securities 30 Nontransaction Deposits 0 Securities0 Nontransaction Deposits 0 Loans 80 Net Worth TOTAL 120 TOTAL 50 Rs 0 Checking Deposits 20 Loans 60 120 TOTAL 60 TOTAL 50 Net Worth 10 60