Based on the following information about Banks A and B compu

Based on the following information about Banks A and B, compute for each the return on assets (ROA), return on equity (ROE), and everage ratio a. Bank A has net profit after taxes of $1.8 million and the following balance sheet: Bank Balance Sheet (in millions) Assets Liabilities Reserves Loans Securities $5 $70 $45 Deposits Borrowin Bank Capital $100 $10 $10 The return on assets (ROA) for Bank A: The return on equity (ROE) for Bank A: The leverage ratio for Bank A: 12 15 percent 18 percent b. Bank B has net profit after taxes of $0.9 million and the following balance sheet: Bank Balance Sheet (in millions) Assets Liabilities Reserves Loans Securities $7.5 $55.0 $23.5 Deposits Borrowin Bank Capital $75.0 $3.0 $8.0 Instructions: Enter your responses rounded to two decimal places The return on assets (ROA) for Bank B percent The return on equity (ROE) for Bank B: percent The leverage ratio for Bank B: Prev1 of 1 Score answer >

Solution

Answer) Return on Assets = Net Income / Total Assets = 0.9/86 = 1.05 %

Net Income =0.9

Total Assets =Reserves+Loans+ Securities = 7.5 +55+23.5 =86

Answer) Return on Equity = Net Income / Total Equity = 0.9/8 = 11.25 %

Total Equity = $8

Answer ) Leveragee Ratio =Total Debt/Total Equity = 86/8 =10.75