Money and Banking

 

 

1. Based on the information provided below about banks A and B, compute for each bank its return on assets
(ROA), return on equity (ROE) and leverage ratio.
a. Bank A has net profit after taxes of $1.8 million and the balance sheet below:
Bank A
(in millions)
Assets Liabilities
Reserves $5 Deposits $100
Loans $70 Borrowing $10
Securities $45 Bank Capital $10
b. Bank B has net profit after taxes of $0.9 million and the balance sheet below:
Bank B
(in millions)
Assets Liabilities
Reserves $7.5 Deposits $75.0
Loans $55.0 Borrowing $3.0
Securities $23.5 Bank Capital $8.0
2. Explain how a bank uses liability management to respond to a deposit outflow. Why do banks prefer liability
management to asset management?
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FRED QUESTIONS
1. Are U.S. banks increasing in size? Use FRED to plot since 1984 on a quarterly basis the number of U.S.
commercial banks (FRED code: USNUM) and, on the right scale, the volume of their deposits (FRED code:
DPSACBM027SBOG). Download the data and compute the average deposit size of banks in the first quarters
of 1984 and 2016.
2. What share of U.S. banks fail? Plot since 2000 the fraction (in percent) of bank failures (FRED code:
BKFTTLA641N) relative to the number of banks (FRED code: USNUM). Comment on the timing and the
proportion of failures. Were most of the failing banks large or small?

 

 

 

 

 

Sample Solution

There are several different types of banking institutions that all work in almost exactly the same way. Before we get into exactly what the banks’ function is in the United States, we want to go over the different types of banks you will come across in the country. Keep in mind that the lines aren’t drawn with permanent marker here – some banks might offer a variety of services spanning across the different types of banks in our list. Retail banks are the ones you come across most often. These banks focus on the consumer and provide the public with a place to deposit money into their own checkings and savings accounts.

ils of the design. On the other side, Pfleeger and Atlee decided to focus on the risks that are related to change and state that Bohner and Arnolds impact analysis can have many risks such as estimates of the resources, effort and schedule. P2: Evaluate the ways in which internal and external drivers of change affect leadership, team and individual behaviours within an organisation. Leaders can influence and help guide colleagues under them, so the organisation can be more effective in achieving their goals. Some leadership styles that are affected by external factors are organisational environment, organisational resources, employee roles, organisational culture, political factors and technology Organisations have their own work environments with their own values. These values are the care the organisation has for their community, staff, investors and customers and also determine how the business will be led. Leaders are dependent on their organisation’s resources such as technology, finance and physical resources to help achieve their goals. The success of an organisation depends on how well resources are handled and distributed. When employees take an important role in the organisation. Their position is defined by tasks and responsibilities that they have. Each employee has a different way in approaching tasks that can impact their career. They also effect the organisation by their work ethics and personal values. Each role will have difficulties that leaders must face to help the business.

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