I want a starting point on how to approach these questions.
Question 1) How do core deposits differ from purchased funds
Question 2) A bank is considering two securities: a 30-year Treasury bond yielding 5 percent. If the bank's tax rate is 30 percent, which bond offers the higher tax equivalent yield
Question 3) A bank is considering an investment in a municipal security that offers a yield of 6 percent. What is this security's tax equivalent yield if the bank's tax rate is 35 percent.
Question 4) How does the asset utilization ratio for a bank compare to that of a retail company? How do the equity multipliers compare?
Question 5) Anytown bank has the following ratios: Profit margin - 21%, Asset utilization - 11%, Equity multiplier - 12X, . Calculate Anytown's ROE and ROA.
Question 6). A security analyst calculates the following ratios for two banks. How should the analyst evaluate the financial health of the two banks.
Bank A Bank B
ROE 22% 24%
ROA 2% 1.50%
Equity multiplier 11X 16X
Profit margin 15% 14%
Asset utilization 13% 11%
Spread 3% 3%
Interest Expense Ratio 35% 40%
Provision for loan loss ratio 1% 4%