When the central bank lowers the required reserve ratio, the banks ability to make loans and the money supply Select one: remain constant decreases Ob decrease decreases Son Oc increase: increases O d. increase: remain constant
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- A decrease in reserve requirements could lead to an A. increase in bank lending. B. increase in the money supply. C. increase in the discount rate. D. both A and B.When both deposit and loan interest rates decrease at the same speed in the market, a bank tends to ( ) to make money. (a. reinvest b. refinance c. keep neutral)A bank holds a loan portfolio with the following characteristics: Loan i Xi Annual spread between loan rate and bank’s cost of funds Annual fees Loss to bank given default Expected default frequency Correlation 1 .6 6% 3% 20% 3% -0.2 2 .4 5% 2% 30% 5% Question 1: what is the return and standard deviation on loan 1? Question 2: what is the return and standard deviation on loan 2?
- 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.The APR is a. the average annual percentage cost paid on deposits b. the average rate paid on deposits c. the average rate paid for credit d. the average annual percentage cost paid for credit Decreasing the amount of liquid assets held for the purpose of meeting loan demands and deposit withdrawals and increasing the usage of deposit and nondeposit sources of funds paying market rates of interest is known as: a. leverage adjustment b. liability management c. liquidity management d. liquidity adjustment Times interest earned is a measure of the a.gross profit compared to annual interest payments b.net earnings after taxes compared annual interest payments c.operational earnings of the firm (EBIT) compared to annual interest payments d.net earnings before taxes compared to annual interest payments A Bankers’ Acceptance is most commonly used in connection with a. financing inventories b. financing securities c. financing trust accounts d. financing foreign tradeAn increase in the current account deficit will place ____ pressure on the home currency value, other things equal. A. upward B. downward C. no D. upward or downward (depending on the size of the deficit)
- A. If Nominal Interest Rate is 6% and the inflation premium is 2% the real interest rate earned by the bank is equal to B. Which tool of monetary policy appeals to the profit motive of the commercial banks to encourage or discourage lending? Edit Format TableAll else the same, a positive duration gap causes the liquidity of the bank to:A. IncreaseB. decreaseC. change only when the level of interest rates is highD. change only when the level of interest rates is lowc) If the interest rates go up by 1%, using the duration and convexity rule to determine the net worth of the bank and the equity to asset ratio d) In c)’s scenario, to maintain the equity to asset ratio at 40% which is required by the regulation, the bank decides to raise cash (zero duration and zero convexity) from the equity holders. How much cash does the bank need to raise? D) IS IN NEED ONLY. plz show the process.
- First National Bank has assets that are more rate-sensitive than its liabilities. As interest rates rise, then we should expect the bank profits to: A. Rise B. Fall C. Remain unchangedThe central bank takes action that lowers interest rates dramatically. what is the effect of it to firm value? increase or decrease and why.a bank that makes most of its long term loans at fixed interest rates is reducing ceedit risk and increasing interest rate risk increasing credit risk and reducing interest rate risk reducing both interest rate and credit risk increasing both interest rate and credit risk