Question

QUESTION 11

Bank Asset Bond A				Bank Liability L
Settlement	6/27/2019			Settlement	6/27/2019
Maturity	6/27/2029			Maturity	6/27/2022
Rate	10%			Rate	8%
Yield	9%			Yield	8%
Redemption	100			Redemption	100
frequency	2			frequency	2
basis	0			basis	0
price of bond				price of bond
The priice of the bank asset is between 105 and 107
The price of the bank liability is 100

True

False

QUESTION 12

One reasonable way for a significantly undercapitalized bank to raise capital is sell unproductive risky assets and use the proceeds to pay down debt. Regulators look at how much equity capital a bank has relative to risky assets.   

True

False

QUESTION 13

The difference between the yield to maturity on the 30-year treasury security and the 1-year treasury security is currently over 100 basis points.

True

False

QUESTION 14

Which of the following statements is false?

		Bank capital is recorded as an asset on the bank balance sheet.
		A bank issues liabilities to acquire funds.
		The bank's assets provide the bank with income.
		A bank's assets are its uses of funds.

QUESTION 15

Unsecured debt issued by bank holding companies is a form of equity capital.

True

False

Answer 1

FV = 100, N = 20, PMT = 5, rate = 4.5%

use PV function in Excel

value of asset = 106.50...so true

price of liability = 100...so true

True

False

Bank capital is recorded as an asset on the bank balance sheet.

False