What is one strategy banks use to mitigate "interest rate risk" in mortgages lending? (note: interest rate risk refers to when interest rates increase) They increase the mortgage term O They decrease the mortgage term O They offer adjustable rate mortgages O They adjust the size of the loan principal

What is one strategy banks use to mitigate "interest rate risk" in mortgages lending? (note: interest rate risk refers to when interest rates increase) They increase the mortgage term O They decrease the mortgage term O They offer adjustable rate mortgages O They adjust the size of the loan principal

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter14: The Financial Crisis And The Great Recessio

Section: Chapter Questions

Problem 3DQ

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Using a graph similar to the one in figure 1 show how, when interest rates increases, savings decreases. make sure to provide proper explanation. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Use the scenario to answer the following question. Bryan has applied for a mortgage with Bank of America. The bank is reviewing the amount of Bryan's monthly income that is used to pay his monthly debt to determine the level of risk in offering him a mortgage. Which of the following concepts characterizes the basic components of a credit score being utilized by the bank? A- payment history B- debt-to-income ratio C- available credit D- length of credit history
1. Financial institutions in the U.S. economy Suppose Clinton decides to use $1,000 currently held as savings to make a financial investment. One method of making a financial investment is the purchase of stock or bonds from a private company. 1. Suppose Warm Breeze, a cloud computing firm, is selling bonds to raise money for a new lab. This practice is called finance. Buying a bond issued by Warm Breeze would give Clinton (an IOU, or promise to pay/ a claim to partial ownership in) the firm. In the event that Warm Breeze runs into financial difficulty, (the stockholders/ Clinton and the other bondholders) will be paid first. 2. Which of the following statements are correct? Check all that apply. - The price of his shares will rise if Warm Breeze issues additional shares of stock. - The Dow Jones Industrial Average is an example of a stock exchange where he can purchase Warm Breeze stock. - Expectations of a recession that will reduce economywide corporate profits will likely…
Suppose Yakov would like to use $8,000 of his savings to make a financial investment. One way of making a financial investment is to purchase stock or bonds from a private company. Suppose TouchTech, a hand-held computing firm, is selling bonds to raise money for a new lab—a practice known as _______(equity/debt) finance. Buying a bond issued by TouchTech would give Yakov_______(a claim to partial ownership in/an IOU, or promise to pay, from) the firm. In the event that TouchTech runs into financial difficulty, ________(Yakov and the other bondholders/the stockholders) will be paid first. Suppose instead Yakov decides to buy 100 shares of TouchTech stock. Which of the following statements are correct? Check all that apply. A. An increase in the perceived profitability of TouchTech will likely cause the value of Yakov's shares to rise. B. The Dow Jones Industrial Average is an example of a stock exchange where he can purchase TouchTech stock. C.…
Johanna is an institutional investor who is looking to “park” some of her investment funds for a short time. How would you explain to Johanna why money market instruments might be useful for her?
How do banks manage interest rate risk? (Select all that apply) 1. Banks can increase their borrowings to manage interest rate risk 2. Interest rate swaps can reduce interest rate risk exposure 3. Banks can reduce interest rate risk by making more floating rate loans 4. Banks can manage interest rate risk by keeping some funds as repurchase agreements
Which of the following is true about banks? Select one: a. The interest rate banks charge when they lend is the same they pay for the deposits they receive. b. Banks are financial institutions through which savers can directly provide funds to borrowers. c. Typically, banks receive few but big deposits, which they then use to make many small loans. d. Through the checking accounts they facilitate, banks provide a medium of exchange.
Economi 15. The federal deposit insurance corporation (FDIC) insures individual bank accounts up to $250,000 per account. Which of the following statements regarding FDIC insurance is true? FDIC insurance a. does not eliminate the need for reserve requirements because bank runs can't be eliminated in a fractional reserve banking system b. has prevented bank runs because the FDIC pays depositors interest at the discount rate on their accounts c. eliminates the need for reserve requirements because banks are not liable for any depositor losses d. works in coordination with reserve requirements to ensure depositor confidence, preventing bank runs.
3) Asma has a credit card account with Bank Muscat. The bank is considering whether to raise Asma’s credit card interest rate. Asma can respond by moving to National bank of Oman (NBO) or do nothing. If Bank Muscat raises Asma’s interest rate and Asma does nothing, then Bank Muscat increases profit by 300 OMR while Asma receives -300 OMR. If Bank Muscat raises Asma’s interest rate and Asma transfers her account to NBO then Bank Muscat receives -150 and Asma receives 100 OMR. If Bank Muscat does nothing and Asma does nothing, then both gets 0 OMR. If Bank Muscat does nothing and Asma transfer her account to NBO then Bank Muscat receives -150 while Asma receives -75 OMR. a. Draw the game with the help of a tree chart.b. If you are a bank manager of the Bank Muscat, then what is the best strategy for you. c. What is the best strategy if you are helping Asma with her decision?
What is Interest Rate Risk and what is difference between Cash Flow Risk and Interest Rate Risk?
A bank may also borrow reserves from its Federal Reserve District Bank at its “discount window.” The interest rate charged is the: A. Federal funds B. Federal funds rate C. Discount rate D. Bank interest rate
Which of the below statements DOES NOT FIT IN with what Wheelan wrote in In chapter 7, "Financial Markets," of the book Naked Economics? Making financial decisions based on emotions can result in bad financial decisions. Wheelan prescribes brain injury as a reliable investment strategy.