Essay on Case 75 Federal Bank Solution - 3035 Words

Case: 75 Federal Finance Bank – Instructor’s Solution INPUT DATA: Amount Needed to Raise Flotation Costs Stock Offer Price Market Value/Book Value Ratio (Dollars in thousands) Assets Cash U.S. Treasuries Mortgage-backed Securities Municipal Bonds Government Agency Securities Total Cash Securities Residential Mortgage Loans Consumer Loans Business Loans Total Loans Fixed Assets Total Assets Liabilities Passbook Savings Non-interest Checking N.O.W. Accounts Money Market Accounts Certiï ¬ cate of Deposits Total Savings Borrowed Money Other Liabilities Total Liabilities Capital Stock ($100 par value) Retained Earnings Total Equity Total Claims Loan Loss Reserve Allowable Risk Adjustment Weights: No default risk Low default risk Res. loans †¦show more content†¦Total Number of Shares Outstanding = capital stock/par value per share = $12,155,000/$100 = 121,550 Book Value per Share = total equity/number of shares outstanding = $26,490,000/121,550 =$217.94 2. Using the data in Table 3, calculate Federal Finance’s 2000 ROA and average annual growth rate in assets from 1995 to 2000. (Hint: In your calculations, use only the data for 1995 and 2000.) ROA = Net Proï ¬ t/ Total Assets = $7,863/$525,826 = 1.50% The compounded annual growth rate in assets can be found as follows: Assets1995 (1+g)5 = Assets2000 $273,617 (1+g)5 = $525,826 (1+g)5 = $525,826/273,617 = 1.92 (1+g) = 1.921/5 = 1.1396 g = 0.1396 = 13.96%. 3. For the four Bank’s listed in Table 4, calculate the following: a. The Capital Asset Ratio for 2000. b. Compound annual growth rates in assets for the ï ¬ ve-year period 1995–2000. c. The ROA ratios in 2000. d. The market value/book value ratios for 2000. e. How does Federal Finance compare with the Capital Asset Ratios and growth rates of these institutions? a. Capital Asset Ratio = Shareholders’ equity/total assets Maryland Financial = $11,800/$220,000 = 5.36% Great Northern Bank = $23,700/$476,000 = 4.98% First Bank of California = $15,400/$305,000 = 5.05% Omaha Federal = $12,900/$238,000 = 5.42% Case: 75 Federal Finance Bank – Instructor’s Solution b. Assets Growth Rate = Assets1995(1+g)5=Assets2000Show MoreRelatedThe Effects Of Inflation On The Economy1129 Words   |  5 Pagesspend more. Moreover, people thought that increasing of inflation allowed the economy to grow. Therefore, if inflation reduced, the unemployment would be raised, and consequently, the economy of the country would be slowing down. Then, the central bank had to increment money supply in order to turn the inflation up again, and so it keeping the economy moving. The society was more used to a Keynesian-economic theory which balanced output with inflation. 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