Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 14, Problem 4P
To determine
By how much the value of financial securities declines.
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Assume that securitization combined with borrowing and irrational exuberance in Hyperville have driven up the value of asset-backed financial securities at a geometric rate, specifically from $4 to $8 to $16 to $32 to $64 to $128 over a six-year time period. Over the same period, the value of the assets underlying the securities rose at an arithmetic rate from $4 to $6 to $8 to $10 to $12 to $14.
If these patterns hold for decreases as well as for increases, by how much would the value of the financial securities decline if the value of the underlying asset suddenly and unexpectedly fell by $6?
Instructions: Give your answer as a whole number.
Let us assume that you have been asked to calculate risk-based capital ratios for Marissa Bills (MB) Bank, a regional commercial bank, with the following accounts: Cash $10 million Government securities 58 million Mortgage loans $33 million Other loans $55 million Fixed assets $ 15 million Intangible assets $2 million Loan-loss reserves 56 million Common equity $8 million Trust-preferred securities $4 million Cash assets and government securities are not considered risky. Loans secured by real estate have a 50% weighting factor. All other loans have a 100% weighting factor in terms of riskiness. a. Calculate the common equity capital ratio of MB Bank. At the year-end, if the MB Bank has $2 million in bad mortgage loans, how the common equity capital ratio would change? b Calculate the Tier 1 capital ratio of MB Bank using risk-adjusted assets. c. Calculate the total capital (Tier 1 plus Tier 2) capital ratio of MB Bank using risk-adjusted assets. d. As a manager of MB Bank, what…
which of the following statement is true? interest rates on municipal bonds are on average
higher than those of the U.S. government bonds with the same terms to maturity because municipal bonds are not as risky as the US government bonds.
lower than those of the US government bonds with the same terms to maturity because municipal bonds are not as risky as the US government bonds
lower than those of the US government bonds with the same terms to maturity because municipal bonds are not as liquid as the US government bonds.
higer than those of the US government bonds with the same terms to maturity because municipal bonds are not as liquid as the US government bonds.
lower than those of the US government bonds with the same terms to maturity because many local business prefers municipal bonds
Chapter 14 Solutions
Macroeconomics
Ch. 14 - Prob. 1DQCh. 14 - Prob. 2DQCh. 14 - Prob. 3DQCh. 14 - Prob. 4DQCh. 14 - Prob. 5DQCh. 14 - Prob. 6DQCh. 14 - Prob. 7DQCh. 14 - Prob. 8DQCh. 14 - Prob. 9DQCh. 14 - Prob. 10DQ
Ch. 14 - Prob. 11DQCh. 14 - Prob. 12DQCh. 14 - Prob. 13DQCh. 14 - Prob. 14DQCh. 14 - The three functions of money are: LO14.1 a....Ch. 14 - Prob. 2RQCh. 14 - Prob. 3RQCh. 14 - Prob. 4RQCh. 14 - Prob. 5RQCh. 14 - Prob. 6RQCh. 14 - Prob. 7RQCh. 14 - Prob. 8RQCh. 14 - Prob. 9RQCh. 14 - Prob. 1PCh. 14 - Prob. 2PCh. 14 - Prob. 3PCh. 14 - Prob. 4PCh. 14 - Prob. 5P
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