Answer: (a) 12.5%;
(b) $153 million
Explanation:
Given that,
Campus Division of All-States Bank,
Assets = $1,800 million
Division profits = $225 million
Cost of capital = 4 percent
(a) Divisional ROI =
=
= 12.5%
(b) Divisional RI = Profits - Assets × cost of capital
= $225 million - $1,800 million × 0.04(4%)
= $225 million - $72 million
= $153 million
Answer:
a) 2.5%
b) 6%
c) 3.5%
Explanation:
The Formula to be used is the <em>habitat hypothesis </em>
as stated in the document attached below
a) it = 2%; it+1 =3%
= 0 + ( 2 + 3 ) / 2
= 2.5% ( two year nominal interest rate )
b) it = 2%; it+1+1 = 10%
= 0 + ( 2 + 10 ) / 2
= 6% ( two year nominal interest rate )
c) it = 2%; 1t+1 = 3%. ∝₂,t = 1%
= 1 + ( 2 + 3 ) / 2
= 1 + 2.5 = 3.5%
