Question: A bank's total assets are comprised of $56 million in loans and $4 million in reserves. The contract rate on loans is 13% and it has a bad loan ratio of 8%, and a recovery rate of 75%. It has deposits of $52 million. The explicit interest rate on deposits is 4% and the cost of free checking, free travelers checks and other free services is 2%. All liabilities are deposits. Fixed operating costs are $812,600.
1. The realized rate or realized yield on loans is?
Answer____________
2. Bank ROE?
Answer_____________
3. What is the real bills or commercial bills doctrine?
4. Graph and explain bank technical and allocative efficiency and technological change. Be specific.