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possible study questions

I need a starting point on how to approach these questions.

1). How do core deposits differ from purchased funds

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

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.

4). How does the asset utilization ratio for a bank compare to that of a retail company? How do the equity multipliers compare?

5). Anytown bank has the following ratios: Profit margin - 21%, Asset utilization - 11%, Equity multiplier - 12X, . Calculate Anytown's ROE and ROA.

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%

Solution Preview

For number one, look up your definitions for both terms, core deposits and purchased funds.

2. There is only one security listed, the 30-Yr treasury bond. Question can't be answered without the second security.

This site has a calculator which can help calculate the bond yields to determine the tax security's yield.

4. Definition

The asset utilization ratio ...

Solution Summary

Scant information was supplied for this posting and not all questions were answerable.