What are the general implications for banks increasing loans and investing less in government securities, other things being the same?Increase in return on assets and increase in liquidityIncrease in return on assets and decrease in liquidityDecrease in return on assets and increase in liquidityDecrease in return on assets and decrease in liquidityWhat are the general implications for banks holding more capital as a percentage of asset rather than less, other things being the same?Increase in return on equity and increase in safetyIncrease in return on equity and decrease in safetyDecrease in return on equity and increase in safetyDecrease in return on equity and decrease in safetyWhich of the following is (are) correct?In general, banks will invest more in treasury securities during weak economic conditionsIn general, banks will extend more loans during weak economic conditionsBoth of the aboveNeither a or bPLEASE WRITE DIRECT AND PRECISE ANSWERS4. InAnything that affects the price of the underlying asset affects the futures priceFutures contract price reflects the expected price of the underlying asset as of the settlement dateBoth of the aboveNeither a or bNeither a or bgeneral, which of the following is correct?Inrather than remaining unhedged?If it has a negative $GAP and if it expects interest rates to increaseIf it has a positive $GAP and if it expects interest rates to decreaseBoth of the aboveNeither a or bWhat are the general implications for banks undertaking more off-balance sheet activities?Increase in fee income, increase in riskIncrease in fee income, decrease in riskDecrease in fee income, increase in riskDecrease in fee income, decrease in riskgeneral, under which of the following condition would a bank consider hedging interest rate risk7. Inrather than remaining unhedged?If it has a negative $GAP and if it expects interest rates to increaseIf it has a positive $GAP and if it expects interest rates to increasegeneral, under which of the following condition would a bank consider hedging interest rate riskc. Both of the above d. Neither a or b8. Which of the following is (are) correct (in general)?Overall, the liquidity risk of finance companies is less than that of other financial institutions.Finance companies are not as susceptible to increasing interest rates as are savings institutions.Both of the aboveNeither a or b

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7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: The Monetary System

Section: Chapter Questions

Problem 5PA

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What are the general implications for banks increasing loans and investing less in government securities, other things being the same?
1. Increase in return on assets and increase in liquidity
2. Increase in return on assets and decrease in liquidity
3. Decrease in return on assets and increase in liquidity
4. Decrease in return on assets and decrease in liquidity
What are the general implications for banks holding more capital as a percentage of asset rather than less, other things being the same?
1. Increase in return on equity and increase in safety
2. Increase in return on equity and decrease in safety
3. Decrease in return on equity and increase in safety
4. Decrease in return on equity and decrease in safety
Which of the following is (are) correct?
1. In general, banks will invest more in treasury securities during weak economic conditions
2. In general, banks will extend more loans during weak economic conditions
3. Both of the above
4. Neither a or b

PLEASE WRI

TE DIRECT AND PRECISE ANSWERS

4. In

Anything that affects the price of the underlying asset affects the futures price
Futures contract price reflects the expected price of the underlying asset as of the settlement date
Both of the above
Neither a or b
Neither a or b

general, which of the following is correct?

In
rather than remaining unhedged?
1. If it has a negative $GAP and if it expects interest rates to increase
2. If it has a positive $GAP and if it expects interest rates to decrease
3. Both of the above
4. Neither a or b
What are the general implications for banks undertaking more off-balance sheet activities?
1. Increase in fee income, increase in risk
2. Increase in fee income, decrease in risk
3. Decrease in fee income, increase in risk
4. Decrease in fee income, decrease in risk

general, under which of the following condition would a bank consider hedging interest rate risk

7. In
rather than remaining unhedged?

general, under which of the following condition would a bank consider hedging interest rate risk

c. Both of the above d. Neither a or b

8. Which of the following is (are) correct (in general)?

Overall, the liquidity risk of finance companies is less than that of other financial institutions.
Finance companies are not as susceptible to increasing interest rates as are savings institutions.
Both of the above
Neither a or b

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