A bank currently just meets its total capital requirements of 8%. The bank currently has a dividend payout ratio of 35%. Assets are expected to grow at 5%.
What is the required ROA to support the growth in assets?
a.) 0.62%
b.) 0.65%
c.) 0.68%
d.) 0.72%
e.) 0.75%
Answer: A
If the bank expects its ROA to be .45%, what is the maximum dividend payout ratio to support the increase in assets?
a.)11.1%
b.)22.2%
c.)33.3%
d.)44.4%
e.)89.9%
Answer: A
If the bank expects its ROA to be .45% and the bank does not wish to change its dividend payout ratio from 35%, how much new equity capital (as a percent of total assets) must the bank issue to support the growth in assets?
a.)0.001075%
b.)0.01075%
c.)0.1075%
d.)1.075%
e.)10.75%
Answer: C=
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Bank Management
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