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Risk-based capital rules cause banks to favor:
A. government bonds
B. revenue bonds
C. all municipal bonds
D. no municipal bonds
Step by step
Solved in 2 steps
- a.Explain how bank regulators have in corporated interest risk into capital requirements. b.Explain how S&L regulators have in corporated interest rate risk into capital requirements.Holdings of government bonds are classified on a bank's balance sheet as Group of answer choices assets, because investing in government bonds represents a use of funds for investment. liabilities, because the bank must borrow in order to be able to invest in the government bonds. assets, because the markets for government bonds are the most liquid in the world. liabilities, because the government bonds must be pledged as collateral against borrowing.An open market operation is an instrument of monetary policy which involves buying or selling of ________from or to the public and banks: a. Bonds and Other local securities b. Debentures and Shares c. Government Securities d. None of These
- When a small firm works with an investment banker to raise funds through the sale of bonds on a best-efforts basis, which of the following functions does not come into play? Underwriting Indenture Origination DistributionA. Provide brief explanations/definitions for each of the following:Tracking error, Asset Swaps, Liquidity Theory of the Term Structure, Contraction Risk. B. Why would a corporation elect to raise funds via a securitization rather than a corporate bond?Remembering: List down four considerations before investment decision making."_________" The higher rate the greater the return."_________" An investment is unideal if the cost of trading is high."_________" There are cost savings in government bonds."_________" Certificate of deposits cannot withdraw anytime.
- 1. How would you define corporatebonds? Explain in your own wordswhat Bonds issued at Par, at aDiscount, and at a Premium are.2. How would you explain thedifference between bank loans andissuing corporate bonds? In youropinion, which of the fundingmethods is more attractive to acompany?Which of the following securities has a component of liquidity risk premium? Long-term government bonds only since all entities that issued long-term securities may be default in payment. All types of government or corporate security because these constituted to be a liability in the part of the issuer. Long-term corporate security because corporations may find it hard to convert assets to cash for payment. All government bond because this type of security is presumed to be always liquid.Based upon risk, which of the following financial assets is likely to have the highest required rate of return? Select one: A. A corporate bond B. A U.S. Treasury bill C. A bank certificate of deposit D. A share of common stock
- Which investments can provide the best protection of capital and offers low risks. *a. savings depositsb. blue chip stocksc. government securitiesd. all of the aboveWhich is false about long-term sources of a firm’s capital? a. Preferred shares are securities whose intrinsic value is based on prospective earnings b. Some types of bank loans may require collateral from potential debtors c. Retained earnings are internal sources of funding that can be utilized for expansion d. All types of corporations may issue equity securities to the publicBank regulators set minimum capital standards to force banks to follow socially desirable policies. True\false. Explain