Bank A is an investment bank. It is involved in arranging mergers and acquisitions and IPOS as well as being a broker in securities. Bank B specialises in car financing. As new cars require a Certificate of Entitlement (COE) which is valid for 10 years, Bank B car loans have a loan period of 10 years or less. The loans have fixed interest rates. Bank C specialises in housing loans with loan periods of 30 years or less, on a floating interest rate basis. Rank the fhree (3) banks' income, in tems of sensitivity to interest rate changes, from lowest to highest sensitivity. Discuss the reasons for your answer.
Bank A is an investment bank. It is involved in arranging mergers and acquisitions and IPOS as well as being a broker in securities. Bank B specialises in car financing. As new cars require a Certificate of Entitlement (COE) which is valid for 10 years, Bank B car loans have a loan period of 10 years or less. The loans have fixed interest rates. Bank C specialises in housing loans with loan periods of 30 years or less, on a floating interest rate basis. Rank the fhree (3) banks' income, in tems of sensitivity to interest rate changes, from lowest to highest sensitivity. Discuss the reasons for your answer.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Bank A is an investment bank. It is involved in arranging mergers and
acquisitions and IPOS as well as being a broker in securities.
Bank B specialises in car financing. As new cars require a Certificate of
Entitlement (COE) which is valid for 10 years, Bank B car loans have a loan
period of 10 years or less. The loans have fixed interest rates.
Bank C specialises in housing loans with loan periods of 30 years or less, on a
floating interest rate basis.
Rank the fhree (3) banks' income, in terms of sensitivity to interest rate changes,
from lowest to highest sensitivity. Discuss the reasons for your answer.
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