When both deposit and loan interest rates increase at the same speed in the market, a bank tends to (      ) to make profit.   a. reinvest  b. refinance   c. keep neutral

Q: 20. When both deposit and loan interestFates decrease at the same speed in the market, a bank tends…

A: Banks go for refinancing when they need to adjust the rate of interest on loans and deposits. As in…

Q: The GAP analysis and EAR analysis a. If GAP is positive and interest rate increases the same on both…

A: Gap analysis is the difference between actual performance and potential performance. It is a…

Q: Question   a) Explain the trend(increase or decrease) b) which one is better conventional or…

A: a) The return on equity has decreased for both Conventional and Islamic. In the case of…

Q: All else being equal, if a central bank buys government bonds from the market it would: a. mean…

A: In finance central bank buying government bonds from the market is known as open market operations.

Q: It is well recognized that banks are quick to increase base loan rates and quick to lower base loan…

A: Bank loan: Bank loan can be defined as the amount of money borrowed from the banking institutions.…

Q: rates rise, bor

A: The correct option is shown as,

Q: Which of the following is a positive sign that a company can quickly turn its receivables into cash?…

A: Receivable turnover ratio shows the effectiveness of a company to extend its credit and also in…

Q: The financial performance of both Commercial Banks and Savings Banks is measured using the Net…

A: The net interest margin is referred as the net benefit of lending which derived from the lending and…

Q: Is it correct to state that banks’ returns will be higher if interest rates increase? Outline the…

A: The duration analysis is the method through which the financial institutions determine the change in…

Q: f a bank's credit ratings decrease, How does this affect borrowers, lenders, and financial…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: Imagine that you are in the position of buying loans in the secondary market (that is, buying the…

A: Banks generally prefer secondary markets for lending purposes so that they can always have the funds…

Q: Banks improves the liquidity of the bank by

A: The correct answer is c. Generating additional income from investment

Q: If a bank has , rate-sensitive assets than liabilities, then in interest rates will increase bank…

A: Lets understand the meaning of rate sensitive asset and liabilities. Rate sensitive asset and…

Q: Changes in interest rates may change the market values of the bank's assets and liabilities by…

A: Price risk is the value of the portfolio or investment due to various factors like volatility, poor…

Q: a bank that makes most of its long term loans at fixed interest rates is reducing ceedit risk and…

A: The banks can make a loan with both of the terms i.e short term loan or long term loans.

Q: When both deposit and loan interest rates decrease at the same speed in the market, a bank tends to…

A: Loan interest rate is the rate at which interest is charged by bank on the lent amount. Deposit is…

Q: Suppose that: Banks Debt Ratio Total Liabilities Total Capital Net Income Bank Alpha 1.50…

A: The debt ratio means the amount that business has to pay out in the long term.

Q: (a) “Both banks and the bond market complete maturity transformation although they accomplish the…

A: Answer

Q: Banks still make more money on investments than fees for customer-related non-credit-related fees.…

A: Investment banking:  Investment banks will also help with reorganizations, mergers, and trades for…

Q: The average maturity of its assets is larger than that of its deposits, as is typical of most banks.…

A: “Hey, since there are multiple questions posted, we will answer first question. If you want any…

Q: Which of the following has caused banks difficulty in estimating liquidity needs? A. competition for…

A: It is the institution that deals with financial and monetary transactions in the economy.

Q: When borrowers tend to pay back the loans to bankers earlier, the bank is facing a. Repricing risk O…

A: Since, more than one different questions are posted, answer for the first question is only provided…

Q: Why would a bank sell a package (portion) of its loans? A) to decrease liquidity B) to increase the…

A: Securitization  is a process wherein individual loans, debts, etc., that involve a payment stream…

Q: Why have off-balance-sheet activities been a growing source of bank profits and what are the…

A: Off-balance sheet is defined as an assets, debts, or the financing activities, which does not…

Q: How should a bank structure its liquid assets portfolio to take advantage of falling interest rates…

A: Liquid assets are cash and assets that can be converted to cash quickly if needed to meet financial…

Q: The average maturity of its assets is larger than that of its deposits, as is typical of most banks.…

A: A bank is exposed to many risks. One of them is when there is a maturity mismatch in the assets and…

Q: Assume two banks are equal to each other in size in terms of total assets. The bank which has more…

A: Explanation: Yes, the bank that would have higher liquidity will have a lower return on equity. The…

Q: As a bank manager, you conclude that the bank has a capital shortfall and should decrease the equity…

A: The equity multiplier is the amount of assets divided by the equity. The multiplier can be reduced…

Q: c) If the interest rates go up by 1%, using the duration and convexity rule to determine the net…

A: c. Computation of the net worth of the bank and equity to asset ratio using the duration and…

Q: The rise of securities markets and the expansion of intermediation by nonbanks has come partly at…

A: A "securities" are financial instruments that are of monetary value and are negotiable and tradable.…

Q: Depositing money into a commercial bank is investing in a

A: Step1: Commercial banks form part of an organized money market. Commercial banks deals in money and…

Q: Only (b) and (c) are true.

A: Mark to market rule refers to the method in which fair values in the account which relate to the…

Q: Making changes to a firm’s credit policy involves trade-offs. Assuming that all other factors remain…

A: Cash discount means giving discount for the customers who are paying amount immediately or before…

Q: Securitization enables a bank to: O a. Move assets off its balance sheet O b. Shift credit risk onto…

A: Assets securitization is a process in which a company collect or assembles its different financial…

Q: Which of these statements about banks is true: i) Banks cannot convert all deposits in the Reserves…

A: Commercial banks is defined as the financial institution, which accepts the deposits, and offers the…

Q: If the deposits/loans ratio is relatively high for a bank, this implies an emphasis on: a.…

A: “Since you have asked multiple questions, we will solve the first question for you.  If you want a…

Q: A. What is the incremental cash flows from switching credit policies? B. What is the cost of…

A: Hey, since there are multiple subpart questions posted, we will answer the first three subpart…

Q: A bank holds a loan portfolio with the following characteristics:   Loan i Xi Annual spread…

A: 1) Given: Loan spread (LS) = 6% Annual fee (AF)= 3% Loss to bank default (LBD)= 20% Expected Default…

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.