If Nominal Interest Rate is 6% and the inflation premium is 2% the real interest rate earned by the bank is equal to B. Which tool of monetary policy appeals to the profit motive of the commercial banks to encourage or discourage lending? Edit Format Table
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A. If Nominal Interest Rate is 6% and the inflation premium is 2% the real interest rate earned by the bank is equal to B. Which tool of
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- Which interest rate is used on very short-term loans from one bank to another? A. Prime interest rate B. Commercial paper rate C. Treasury bill rate D. Fed funds ratec) If the interest rates go up by 1%, using the duration and convexity rule to determine the net worth of the bank and the equity to asset ratio d) In c)’s scenario, to maintain the equity to asset ratio at 40% which is required by the regulation, the bank decides to raise cash (zero duration and zero convexity) from the equity holders. How much cash does the bank need to raise? D) IS IN NEED ONLY. plz show the process.Which interest rate is used on very short term loans from one bank to another? A. PRIME INTEREST RATE B.TREASURY BILL RATE C. COMMERCIAL PAPER RATE D. FED FUNDS RATE
- Answer the following statements It is an average interest rate that banks offer in the financial market: a. effective rate b. Cetes c. CPP d. TIIE It is the payment for the use of someone else's money: a. simple interest b. interests c. amount d. interest rateWhich of the following would increase a bank’s Net Interest Margin, assuming all else stays the same? Choose Two an increase in the interest rate on its loans companies paying off some of their loans and the bank using the funds to purchase Treasury bonds customers switching a portion of their time deposits to demand deposits the bank issues additional equity and keeps the funds in cash an increase in the federal funds rate assuming the bank borrows more in the federal funds market than it lendsA bank holds a loan portfolio with the following characteristics: Loan i Xi Annual spread between loan rate and bank’s cost of funds Annual fees Loss to bank given default Expected default frequency Correlation 1 .6 6% 3% 20% 3% -0.2 2 .4 5% 2% 30% 5% Question 1: what is the return and standard deviation on loan 1? Question 2: what is the return and standard deviation on loan 2?
- How does the interest paid on U.S. savings bonds compare to the savings account rates paid by banks and credit unions? A.The interest paid on U.S. savings bonds is higher than the savings account rates paid by banks and credit unions. B.The interest paid on U.S. savings bonds is lower than the savings account rates paid by banks and credit unions. C.The interest paid on U.S. savings bonds is twice as much as the savings account rates paid by banks and credit unions. D.The interest paid on U.S. savings bonds is the same as the savings account rates paid by banks and credit unions.The discount rate is O the interest rate commercial banks charge each other for overnight loans. the interest rate the Federal Reserve charges member banks for loans from the Fe the interest rate consumers with good credit pay for bank loans. O the interest rate the Federal Reserve charges consumers for short term loans.1. Rank the following types of bank liabilities, first according to their level of liquidity risk, and then according to their interest rate risk. Then rank them according to their current cost to the bank. Explain why the rankings vary. DDAs Interest-checking accounts MMDAs Small-time deposits Jumbo CDs Federal funds purchased Eurodollar liabilities Federal Home Loan Bank advances
- 1. Which of the following is not a way in which banks lend short-term unsecured loans? Choices: By sending the amount earned from trust and investment products offered by the bank Through a guaranteed credit line that has a commitment fee for any unused amount for the year Through credits cards lines with a certain credit limit By lending a single date maturity loan to a debtor 2. The following are methods of acquiring funds through long-term financing, except Choices: Issuing bonds with semi-annual coupon payment at a discounted price Selling equity securities at an amount above the par value indicated in the stock certificate Issuing a note that indicates a promise to pay the indicated supplier in a future date Selling equity securities with a characteristic of both debt and equity security 3. Which is false about long-term sources of a firm's capital? Choices: Preferred shares are securities whose intrinsic value is based on prospective earnings All types of…Suppose a bank currently has $250,000 in deposits and $27,000 in reserves. The required reserve ratio is 10%. If at the end of the day, there is an unexpected withdrawal of $4,000 in reserves, what is the bank's resulting reserve ratio (expressed as a %)? Using the information from the prior problem, how much would the bank need to borrow in either the Fed Funds market or at the discount window, to be in complicance with the required reserve ratio?Consider a bank with the following balance sheet (Shown in image):a) Calculate the equity (total asset – total liability) to asset ratio of the bank(Hint: equity to asset ratio = total equity/total asset) b) Calculate the duration and convexity of the both asset and liability sides; c) If the interest rates go up by 1%, using the duration and convexity rule to determine the networth of the bank and the equity to asset ratio; d) In c)’s scenario, to maintain the equity to asset ratio at 40% which is required by the regulation,the bank decides to raise cash (zero duration and zero convexity) from the equity holders.How much cash does the bank need to raise? e) Do you agree with the following statement? Explain why. “The information about a bond’s duration and convexity adjustment is sufficient to quantifyinterest rate risk exposure.”
