If a bank manager wants to protect the bank against losses that would be incurred on its portfolio of Treasury securities should interest rates rise, he could options on financial futures. Select one: A. sell put B. sell call C. buy put D. buy call
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- If a bank manager wants to protect the bank against losses that would be incurred on its portfolio of Treasury securities should interest rates rise, he could financial futures. A. sell put B. sell call C. buy put D.buy callbank manager wants to protect the bank against losses that would be incurred on its portfolio of Treasury securities should interest rates rise, he could financial futures. If a Not yet options on answered Points out of 1 Select one: PFlag question A. sell put B. sell call C. buy put D.buy callThe number of futures contracts that a bank will need in order to fully hedge its overall interest rate risk exposure and protect the net worth depends upon (among other factors): the relative duration of bank assets and the duration of the underlying security named in the futures the price of the futures All of the options are correct A financial institution that uses a long hedge is most likely: trying to avoid higher borrowing trying to avoid declining asset trying to avoid lower than expected yields from loans and trying to avoid higher borrowing costs or trying to avoid declining asset An advantage of interest rate swap is that: it can help protect from interest rate it can help closely match the maturities of assets and it can help transform actual cash flows to more closely match desired cash flow All of the options are correct Default risk on bonds can be evaluated by using: financial analysis bond ratings estimates of potential losses on bonds a and b…
- If a bank manager wants to protect the bank against losses that would be incurred on its portfolio of treasury securities should interest rates rise, he could Question 14 options: 1) sell call options on financial futures. 2) buy call options on financial futures. 3) buy put options on financial futures. 4) sell put options on financial futures.What kind of futures hedge would be appropriate in each of the following situations? a. A bank fears that rising deposit interest rates will result in losses on fixed-rate loans? b. A bank holds a large block of floating-rate loans and market interest rates are falling? c. A projected rise in market rates of interest threatens the value of the bank's bond portfolio?If a firm increases its financial risk by selling a large bond issue that increases its financial lewverage explain this assumption?Also what is the relationshipbetween risk and return. Explain with examples bold examples.
- If ABC Bank’s ALCO targets the market value of shareholders’ equity in its interest rate risk management, is the bank positioned to gain or lose if interest rates fall? If interest rates rise by 1% for all assets and liabilities, what is the approximate expected change in the bank’s economic value of equity? Provide a specific transaction that the bank could implement in order to immunize its interest rate risk exposure.What is the primary motivation of investors in performing security analysis? A-identify the best times to buy and sell securities B-Contribute to the efficiency of securities markets C-Identify securities whose insrinsic values are at or near their market values D-Identify mispriced stocksA hedge fund purchased credit default swaps on securities it did not own because it believed that the securities were likely to default. In this example, the hedge fund is speculating or hedging?
- How should a bank structure its liquid assets portfolio to take advantage of falling interest rates ? a. The bank should invest in short-term securities to minimise capital loss b. The bank should invest in long term securities to maximise capital gains. c. The bank should borrow at fixed interest rates d. The bank should issue certificate deposits with fixed interest rates. e. The bank should hold cash to maximise its interest income. Which option is correctWhich of the following is NOT an external method of interest rate risk management? * A. Using an interest rate swap B. Using financial futures C. Using an off-balance-sheet strategy, such as a forward rate agreement D. Having fixed-interest assets financed by fixed-interest liabilities and equitywhich of the following statements about trading risk is correct? it is easily identified by careful examination of a bank's balance sheet the solution for controlling trading risk is to compute the risk of the portfolios the traders generate managing trading risk is more of a problem for small banks than it is for large banks all of the above none of the above
