Following is the information for Carter State Bank.What is the bank's ROE? $\begin{array} { l l }
\text { Net income } & \$ 55 \text { million } \
\text { Total operating revenue } & \$ 650 \text { million } \
\text { Total assets } & \$ 4,055 \text { million } \
\text { Total equity capital } & \$ 350 \text { million }
\end{array}$
A)8.46 percent
B)16.03 percent
C)15.71 percent
D)1.36 percent
E)None of the options is correct

Question

Following is the information for Carter State Bank.What is the bank's ROE? $\begin{array} { l l } 
\text { Net income } & \$ 55 \text { million } \
\text { Total operating revenue } & \$ 650 \text { million } \
\text { Total assets } & \$ 4,055 \text { million } \
\text { Total equity capital } & \$ 350 \text { million }
\end{array}$
A)8.46 percent
B)16.03 percent
C)15.71 percent
D)1.36 percent
E)None of the options is correct

Quizplus · Accepted Answer

The ROE can be calculated by dividing net income by average shareholder's equity. Using the information given in the table, net income is $1,500,000 and average shareholder's equity is ($6,500,000 + $7,800,000)/2 = $7,150,000. Therefore, the ROE is 21 percent ($1,500,000/$7,150,000). The closest option to this is C, which is 15.71 percent. None of the other options are even close to the calculated ROE.

Following Is the Information for Carter State Bank A)846 Percent B)16

Following Is the Information for Carter State Bank A)846 Percent
B)16