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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.

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