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40. Historically, most industrial loan companies have operated to:a.accept deposits.b.assist their parent company in some facet of the firm’s core business.c.exclusively make commercial loans.d.increase the safety and soundness of the parent company.e.purchase municipal securities.Problems (25 Points):Use the following information for questions 43 – 47. Please show all calculations.
Cash and Due from Banks50$ Investments300$ Federal Funds10$ Loans350$ Premises90$ Average Total Assets800$ Demand Deposits100$ Time Deposits300$ Federal Funds300$ Equity100$ Average Total Liabilities & Equity800$ Interest Income100$ Interest Expense75$ Non-Interest Income5$ Non-Interest Expense25$ Net Income5$ Balance SheetIncome Statement1st State BankAssetsLiabilities & Equity41. What is 1stState’s return on equity?42. What is 1stState’s net interest margin?43. What is the earnings base at 1stState?
44. What is 1stState’s burden ratio?45. What is 1stState’s efficiency ratio?
46. Discuss the principal sources of risk facing a bank manager. Give at least one example foreach source.47. How would a bank’s ability to control its burden ratio impact its return on equity? Useexample to elaborate your answer.48. Discuss the four types of businesses that investment banks traditionally engage in. Useexamples to elaborate your answer.