question archive The goal of this project is to have you perform multiple calculations using a hypothetical bank’s balance sheet and related information, then interpret those calculations’ results to comment on the bank’s financial health
The goal of this project is to have you perform multiple calculations using a hypothetical bank’s balance sheet and related information, then interpret those calculations’ results to comment on the bank’s financial health
Subject:AccountingPrice: Bought3
The goal of this project is to have you perform multiple calculations using a hypothetical bank’s balance sheet and related information, then interpret those calculations’ results to comment on the bank’s financial health.General InformationAssume you are doing all calculations as of October 8, 2015.Format your answers as required, or you’ll lose points.Make sure to read all parts of each question and omit no steps!A Note on “Real World†Bank Balance SheetsThe ways that banks record information on their balance sheets can vary quite a bit from bank to bank.For example, on Bank G’s balance sheet included here, under liabilities we see an account labeled as“borrowings from the Fed†instead of “discount loans†as we might expect. This is common. Be careful!Assume that anything not given or calculable with the given information has a value of 0.Also, don’t necessarily assume that all the information on this sheet will be utilized in your calculations.Bank balance sheets have lots of extra stuff on them, so I’m trying to add some realism.BANK G’S BALANCE SHEETCash $14,600Bonds, Totaling $(A)Composed of:Fully backed mortgage bonds $14,000Municipal bonds $9100US government bonds $27,700Buildings and furniture $48,400Deposit in the Fed $71,200Loans, Totaling $157,460Composed of:Loans to businesses $52,200Loans for homes $(B)Non-home loans to consumers $12,750Loans to other banks $6830—————————————————————Total Assets $342,460Borrowings Totaling $49,850Composed of:Federal funds $38,650Borrowings from the Fed $11,200Deposits, Totaling $261,210Composed of:Checking deposits $234,000Savings deposits $27,210Equity $(C)—————————————————————-Total Liabilities and Net Worth $???Bank income informationInterest income, bonds, $2600Interest income, loans, $17,000Other income $1100Bank expense informationWages and salaries $4000Interest expense, deposits $9000Interest expense, discount and federal funds loans $900Other (non-interest) $4800Dates of NoteNovember 15th, 2015: 20% of total loans will be repriced.April 10th, 2016: 50% of discount loans will be repriced.July 1st, 2016: 40% of consumer non-mortgage loans will be repriced.Credit Information20% of mortgages are more than 60 days past due.Miscellaneous Bank InformationBanks must keep 10% of demand deposits as reserves.The bank owes no taxes.Questions1) Calculate the one-year repricing GAP ratio. Express your answer as a percent rounded to two decimal places (4 points) as needed. Then use information from the Fed to write 1-2 paragraphs making your prediction on what will happen to interest rates in the near future. Include a Works Cited (MLA or APA is fine) for at least two official Federal Reserve sources. Then interpret your GAP ratio result with this information in mind. (5 points)2) Fill in the blanks marked (a), (b), and (c) on the balance sheet (6 points). Round your results to thenearest penny as needed.3) Calculate the bank’s actual, required, and excess reserves (6 points). Round your results to thenearest penny as needed.4) For each of the following measures of bank health, do the proper calculation, compare it tobenchmark values or guidelines for interpretation if any are available in the text or lecture, and comment on whether, by itself, the result is a sign of generally good bank health or generally poor bank health. Write each result as a percentage rounded to two decimal places as needed. Each complete answer is worth 4 points, for a total of 24 points)RoARoENet interest marginLeverage ratioLiquidity ratioEfficiency ratio5) Share your opinion in 1-2 paragraphs on whether Bank G is in overall good health or overall badhealth, referring specifically to the values you found for Questions 1 and 4 above and what you expectabout interest rates. To receive full credit, you should also explain how each measure in Question 4influences overall bank health.
