Markets: A Rigorous Course
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M06 · Problem 7 ★★ Check

Banks on book

(a) A private bank has ROE 16%, growth 12% and cost of equity 13.5%. Compute justified P/B. (b) A PSU bank has ROE 10%, growth 8%, cost of equity 14%. Compute justified P/B. (c) A bank trades at 1.5× book with gg = 10% and kk = 13%. What sustainable ROE is the market pricing?

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Commas, ₹, % and 1e-3 notation are accepted.

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