Question

Chapter 4 page 97 Question: 5 10. What is the Beige book and why is it important to the FOMC? ANSWER: Chapter 17 page 500 Questions: 2, 10 11. What are four major sources of funds for banks? What alternatives does a bank have if it needs temporary funds? What is the most common reason that banks issue bonds? ANSWER 12. Why do banks invest in securities, even though loans typically generate a higher retur? How does a bank decide the appropriate percentage of funds that should be allocated to each type of asset? Explain. ANSWER: Chapter 19 page 521-522_ Questions: 1,3,4,6 13. What is accomplished when a bank integrates its liability management with its asset management? ANSWER: 14 How do banks resolve illiquidity problems? ANSWER: 15. If a bank expects interest rates to decrease over time, how might it alter the rate sensitivity of its assets and liabilities? ANSWER: 16. If a bank is very uncertain about future interest rates, how might it insulate its future performance from future interest rate movements? ANSWER: Chapter 19 page 559 Problems: 1, 2, 3 17. Net Interest Margin. Suppose a bank eam's $201 million in interest revenue but pays $156 million in interest expense. It also has $800 million in earning assets. What is its not interest margin? ANSWER

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The Beige Book is the informal name for the Summary of Commentary on Current Economic Conditions by Federal Reserve District. It is a report published eight times per year. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector. An overall summary of the twelve district reports is prepared by a designated Federal Reserve Bank on a rotating basis

It is important to the FOMC because it is used by the committee to make key decisions about the economy. It discusses the affects of various macroeconomic variables on businesses. The policy of the FOMC is affected to a major extent by this report.