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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%
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.

3. http://www.morganstanleyindividual.com/markets/bondcenter/TEYCalculator/
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.

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