What is the weekend game? The buying and selling of Fed funds late Friday afternoon. A strategy to reduce the cost of meeting reserve requirements. The triple witching effect on the third Friday of the month. A strategy to reduce bank interest rate risk exposure. A strategy to reduce bank liquidity risk exposure.

What is the weekend game? The buying and selling of Fed funds late Friday afternoon. A strategy to reduce the cost of meeting reserve requirements. The triple witching effect on the third Friday of the month. A strategy to reduce bank interest rate risk exposure. A strategy to reduce bank liquidity risk exposure.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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UANG Financials is quite certain that interest rates are going to decrease next month. How should the bank manager adjust the bank’s maturity gap to increase its equity value when interest rates decrease ? Group of answer choices The bank should set its maturity gap to a positive position. In this case, as rates decrease, market value of assets will increase by less than the increase in market value of liabilities. The bank should set its maturity gap to a negative position. In this case, as rates decrease, market value of assets will decrease by less than the decrease in market value of liabilities. The bank should set its maturity gap to a negative position. In this case, as rates decrease, market value of assets will decrease by more than the decrease in market value of liabilities. The bank should set its maturity gap to a positive position. In this case, as rates decrease, market value of assets will increase by more than the increase in market value of…
6) Bruce the Bank Manager can reduce interest rate risk by assets to increase their rate sensitivity or, alternatively, liabilities. A) shortening; lengthening B) shortening; shortening C) lengthening; lengthening D) lengthening; shortening the duration of the bank's the duration of the bank's
Match the correct type of bank risk with the appropriate associated statement. 1.The possibility that a borrower could make late, reduced, or no payments on their loans. 2.Bank management may make poor strategic decisions that result in lower profits for the bank. 3.Hackers could break into bank customer accounts. 4.Inability to access capital markets and higher borrowing costs could hurt the bank's ability for funding opportunities. 5.Changes in the yield curve could increase short-term rates and/or decrease long-term rates, resulting in a lower net interest margin for the bank. 6.General economic conditions can affect banks in the U.S. Liquidity Risk 7.Differences in the timing and drivers of rate changes reflecting the maturity and/or repricing of assets and liabilities could put the bank's earnings at risk. Credit Risk Business Operations Risk Market risk Interstate Rate Risk Liquidity Risk
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 correct
Which of the following decreases the likelihood of bank failures by keeping banks from making risky loans? FDIC insurance The discount window Reserve requirements Capital requirements
Construct a bank balance sheet with the following items : reserves , deposits , loans , securities , capital , and debt . Choose values so that the reserve -deposit ratio is 10 percent and the leverage ratio is 10. Give an example of a change in asset values that would push bank capital to zero . What happens when bank capital is gone ?
If investors shift funds from stocks into bank deposits (this is common during a financial crisis), this _______ the supply of loanable funds, and places _______ pressure on interest rates. Question 9 options: increases; upward increases; downward decreases; downward decreases; upward
Which of the following will have the same effect on money supply as raising the reserve requirement? a) The central bank decreases the interest rate. b) The central bank purchases bonds in the market. c) The central bank purchases securities and debentures in the market. d) Lower bond prices.
Which of the following is NOT an advantage of depositing funds into a bank account (compared to directly purchasing corporate bonds and shares): Options 1. Higher transactions costs 2. Monitoring performed by the bank on behalf of the depositor 3. Better liquidity if funds are needed quickly 4. Efficient payment services 5.Reduced price risk if funds are needed immediately
Borrowing of reserve fund by Bank means a. To meet the customers need for business loans b. Overnight borrowing by banks to provide customers short term loans c. Borrowing by banks to meet unexpected rise in customers withdrawal d. Overnight borrowing by banks to meet customers deposit
Which 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 lends
how and why interest rates will change over the next three months. Why forecasts of future interest rates are important? You may explain how changes in the factors that cause changes in interest rates influence investors its decisions in the credit markets.

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