Q.1. How are the balance sheets and income statements of finance companies, insurers, and securities firms similar to those of banks, and in what ways are they different? What might explain the differences you observe? Points-5
Q.2. Depositor’s Savings association has a ratio of equity capital to total assets of 7.5%. In contrast, Newton Savings reports an equity capital-to-asset ratio of 6%. What is the value of the equity multiplier for each of these institutions? Suppose that both institutions have an ROA of 0.85%. What must each institution’s return on equity capital be? What do your calculations tell you about the benefits of having as little equity capital as regulations or the marketplace will allow? Points-5
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