What type of risk is a bank is exposed to when interest rates are falling? What...
What type of risk is a bank is exposed to when interest rates are falling? What is an example of this?
Homework Answers
It is the interest rate risk that takes place to the banks, when interest rate is falling. For example, today, banks accepts deposits at 6% interest rate and agree to pay it over a period of deposit term. But, after 1 month, interest rate falls in the market and funds are lended by the banks at lower rates. Now, banks are paying higher interest rate to depositors ,but getting lower rates from borrowers, creating interest rate risk.
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What type of risk is a bank is exposed to when interest rates
are falling? What...
If interest rates are falling, and Interest Sensitive Liabilities are greater than Interest Sensitive Assets, is...
If interest rates are falling, and Interest Sensitive Liabilities are greater than Interest Sensitive Assets, is this favorable or unfavorable to the bank? Why?
11. If interest rates are falling, and Interest Sensitive Liabilities are greater than Interest Sensitive Assets,...
11. If interest rates are falling, and Interest Sensitive Liabilities are greater than Interest Sensitive Assets, is this favorable or unfavorable to the bank? (2) Why? (3) 12. When dealing with Structure of Funds Management, what are the three (3) Types of Deposits that Banks have to manage? Name them, and briefly describe each. (6) a) b) c) 13. What is Securitization? (2) 14. Name two (2) reasons why Banks use Securitizations? (4) 15. What is CDARS (2)? What is...
Under what conditions is an investor exposed to interest rate (or price) risk? Reinvestment (rollover) risk?
Under what conditions is an investor exposed to interest rate (or price) risk? Reinvestment (rollover) risk?
When there is a run on a bank, this bank is facing ___ risk -inflation -interest...
When there is a run on a bank, this bank is facing ___ risk -inflation -interest rate -operational -liquidity
What generally happens when a central bank unexpectedly decreases interest rates?
What generally happens when a central bank unexpectedly decreases interest rates? The currency strengthens, then weakens. The currency strengthens. The currency weakens. The currency weakens, then strengthens.
1) For U.S. Treasury bonds, what type of risk exists when rates are historically low? _______...
1) For U.S. Treasury bonds, what type of risk exists when rates are historically low? _______ A) Gap risk B) Interest-rate risk C) Default risk D) Reinvestment risk 2) Which of the following institutions assign ratings for bonds in the United States? _______ A) The Securities and Exchange Commission B) The Federal Reserve District Banks C) The U.S. Treasury D) Private companies such as Moody’s and Fitch 3) If the three-month Treasury bill yields 3.1% while the yield on a...
QUESTION 9 Select all of the following that are true regarding interest rates: Interest rates on...
QUESTION 9 Select all of the following that are true regarding interest rates: Interest rates on bonds rise when the demand for bonds increases regardless of risk US Quantitative Easing causes all interest rates to fall Interest rates fall when the economy grows since the central bank is providing stimulus As the yield curve flattens, all interest rates fall Interest rates are controlled by the central bank Interest rates fall to attract investors since it indicates lower risk
Risk Bank has a negative GAP position. If a parallel shift upward in interest rates occurs,...
Risk Bank has a negative GAP position. If a parallel shift upward in interest rates occurs, the bank’s net interest income would be expected to: Question 23 options: Decrease by an amount equal to GAP Decrease by an amount equal to GAP times the change in rates Increase by an amount equal to GAP Increase by an amount equal to GAP times the change in rates
Problem 3 (7 points): Bank wants to lend to business on floating interest rates. The bank...
Problem 3 (7 points): Bank wants to lend to business on floating interest rates. The bank is pretty sure that the client does not default, so the bank excludes credit risk. The bank wants to maintain the ratio between equity and risk weighted assets at 12% and wants to keep return on equity at 20%. All Tier1 is share equity. Assume that the bank is only lending to unrated corporate customers. The bank can take loan on Libor flat interest...
What type of information is used when performing a regression analysis? Interest rates Return on investment Projected sales or revenues Production schedules What type of information is used when...
What type of information is used when performing a regression analysis? Interest rates Return on investment Projected sales or revenues Production schedules
What type of information is used when performing a regression analysis? Interest rates Return on investment Projected sales or revenues Production schedules
11. If interest rates are falling, and Interest Sensitive Liabilities are greater than Interest Sensitive Assets, is this favorable or unfavorable to the bank? (2) Why? (3) 12. When dealing with Structure of Funds Management, what are the three (3) Types of Deposits that Banks have to manage? Name them, and briefly describe each. (6) a) b) c) 13. What is Securitization? (2) 14. Name two (2) reasons why Banks use Securitizations? (4) 15. What is CDARS (2)? What is...
QUESTION 9 Select all of the following that are true regarding interest rates: Interest rates on bonds rise when the demand for bonds increases regardless of risk US Quantitative Easing causes all interest rates to fall Interest rates fall when the economy grows since the central bank is providing stimulus As the yield curve flattens, all interest rates fall Interest rates are controlled by the central bank Interest rates fall to attract investors since it indicates lower risk
Problem 3 (7 points): Bank wants to lend to business on floating interest rates. The bank is pretty sure that the client does not default, so the bank excludes credit risk. The bank wants to maintain the ratio between equity and risk weighted assets at 12% and wants to keep return on equity at 20%. All Tier1 is share equity. Assume that the bank is only lending to unrated corporate customers. The bank can take loan on Libor flat interest...
What type of information is used when performing a regression analysis? Interest rates Return on investment Projected sales or revenues Production schedules
What type of information is used when performing a regression analysis? Interest rates Return on investment Projected sales or revenues Production schedules
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