FIN INTERMEDIARIES quiz notes
docx
keyboard_arrow_up
School
Tarleton State University *
*We aren’t endorsed by this school
Course
17354
Subject
Finance
Date
May 24, 2024
Type
docx
Pages
9
Uploaded by nancyeufracio101
QUIZ 8
EVE analysis: is essentially a _____________ analysis.
liquidation
Duration gap analysis:
Correct!
applies he the concept of duration to the bank’s entire balance sheet.
A bond has a Macaulay's duration of 7.1 years. If interest rates change from 9.04% to 7.81%, what should the percent change be in the bond price? Since
I have not specified the actual term, interest rates, or anything else, please use the
modified duration formula
to approximate the answer.
Please respond without
the percent sign.
If you calculate that the price will
increase by 13.45%, then enter
13.45
without the % sign.
And make
sure the sign is correct (positive or negative matter).
Correct!
Correct Answer
-8.01
A bond has a Macaulay's duration of 3.5 years. If interest rates change from 11.11% to 6.82%, what should the percent change be in the bond price? Since I have not specified the actual term, interest rates, or anything else, please use the
modified duration formula
to approximate the answer.
Please respond
without
the percent sign.
If you calculate that the price will increase by 13.45%, then enter
13.45
without the % sign.
And make sure the sign is correct (positive or negative matter).
You Answered
Correct Answer
-13.51
Assume we have a 10 year 8.88% coupon bond selling for $1,000 and callable at par with semi-annual compounding. What would be the
effective
duration
if the interest rates could change by 50 basis points (annually)?
Please enter your answer to the nearest hundredth
(in other words if you calculate a duration of 1.23456 years, you must enter at least 1.23).
You Answered
Correct Answer
6.4
margin of error
+/-
0.05
Assume we have a 13 year 11.10% coupon bond selling for $1,000 and callable at par with semi-annual compounding. What would be the
effective
duration
if the interest rates could change by 50 basis points (annually)?
Please enter your answer to the nearest hundredth
(in other words if you calculate a duration of 1.23456 years, you must enter at least 1.23).
You Answered
Correct Answer
6.63
Which of the following allows a security's cash flows to change when interest rates change?
Effective duration
The steps to conducting a
Duration GAP
are:
1.
1.
Forecast interest rates.
2.
Forecast interest rates.
3.
Forecast changes in EVE across different interest rate environments.
4.
Forecast changes in EVE across different interest rate environments.
Answer 1:
Forecast interest rates.
Answer 2:
Forecast interest rates.
Answer 3:
Forecast changes in EVE across different interest rate environments.
Answer 4:
Forecast changes in EVE across different interest rate environments.
Which of the following is
false
regarding duration gap analysis?
Duration gap analysis indicates the potential change in a bank's net interest income.
A bank has the following balance sheet:
ASSETS
Market Value
Yield
Duration
LIAB. & EQUITY
Market Value
Yield
Duration
Cash
85
1-yr Time deposit
565
3.4%
0.9
3-yr Commercial loan
733
11.0%
1.6
3-yr CD
202
3.2%
2.6
6-yr Treasury bond
191
4.2%
3.8
Equity
???
????
????
What is the
weighted average duration of assets
?
Correct Answer
1.9
A bank has the following balance sheet:
ASSETS
Market Value
Yield
Duration
LIAB. & EQUITY
Market Value
Yield
Duration
Cash
120
1-yr Time deposit
10
4.7%
0.6
3-yr Commercial loan
714
11.4%
1.8
3-yr CD
5
6.9%
2.7
6-yr Treasury bond
238
8.7%
4.3
Equity
???
????
????
What is the
weighted average duration of liabilities
? Please
answer to the nearest hundredth
(if you calculate 1.23456, then you must answer at least to the
1.23
level).
Correct!
Correct Answer
1.3
A bank has the following balance sheet:
ASSETS
Market Value
Yield
Duration
LIAB. & EQUITY
Market Value
Yield
Duration
Cash
111
1-yr Time deposit
502
5.0%
0.6
3-yr Commercial loan
744
8.1%
2.4
3-yr CD
179
7.0%
3.0
6-yr Treasury bond
238
6.5%
4.6
Equity
???
????
????
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
What is the bank's
duration gap
? Please
answer to the nearest hundredth
(if you calculate 1.23456, then you must answer at least to the
1.23
level).
Correct!
Correct Answer
1.87
A bank has the following balance sheet:
ASSETS
Market Value
Yield
Duration
LIAB. & EQUITY
Market Value
Yield
Duration
Cash
107
1-yr Time deposit
580
3.2%
0.6
3-yr Commercial loan
611
11.5%
2.5
3-yr CD
209
6.0%
2.9
6-yr Treasury bond
176
4.4%
4.3
Equity
???
????
????
What is the
weighted average duration of assets
?
Correct!
Correct Answer
2.6
A bank has the following balance sheet:
ASSETS
Market Value
Yield
Duration
LIAB. & EQUITY
Market Value
Yield
Duration
Cash
85
1-yr Time deposit
3
3.6%
0.9
3-yr Commercial loan
649
9.8%
1.6
3-yr CD
5
4.9%
2.8
6-yr Treasury bond
204
6.9%
5.5
Equity
???
????
????
What is the
weighted average duration of liabilities
? Please
answer to the nearest hundredth
(if you calculate 1.23456, then you must answer at least to the
1.23
level).
Correct!
Correct Answer
2.09
A bank has the following balance sheet:
ASSETS
Market Value
Yield
Duration
LIAB. & EQUITY
Market Value
Yield
Duration
Cash
98
1-yr Time deposit
581
3.3%
0.6
3-yr Commercial loan
789
10.9%
1.8
3-yr CD
173
4.6%
2.8
6-yr Treasury bond
246
6.6%
5.8
Equity
???
????
????
What is the bank's
expected economic net interest income
? Please
answer to the nearest hundredth
(if you calculate 1.23456, then you must answer at least to the
1.23
level).
You Answered
Correct Answer
75.11
If a bank has calculated their duration GAP to be 2.59, as interest rates decrease what would you expect to happen?
The market value of their assets will increase. The market value of their liabilitieis will also increase, but not as much as their assets. And therefore, the economic value of their equity will increase.
If a bank has calculated their duration GAP to be -1.77, as interest rates increase what would you expect to happen?
The market value of their assets will decrease. The market value of their liabilities will also decrease, and will decrease more than that of their assets. And therefore, the economic value of their equity will increase.
Which of the following will
not
affect a bank’s duration estimate for the year?
Holding a 2 year zero coupon bond until maturity.
If the yield curve is inverted, a portfolio manager can take advantage of this by:
buying more long-term securities.
To perfectly immunize a bank’s economic value of equity from changes in interest rate risk, it should:
adjust assets and liabilities such that its duration gap is equal to zero.
Which of the following is NOT a weakness of duration gap analysis?
It is difficult to estimate the duration on zero coupon bonds.
Chapter 6 quiz You are an art investor. You just purchased a painting from a famous artist. You paid $9,780,859 for that painting. The collector from which you bought the painting claims to have held the painting for 23 years. She claims she earned a return of 33.90% per year.
What did she pay for the painting 23 years ago?
Please enter your response to the nearest penny.
Correct!
Correct Answer
11,869.26
Chapter 10
___________ includes federal funds purchased, repurchase agreements and Federal Home Loan Bank borrowings.
Correct!
Borrowed funding
All of the following are considered transaction accounts
except
:
negotiable orders of withdrawal.
On-us checks
cashed
are:
checks drawn on a bank's own customer's account.
High interest rates in the late 1990’s on large CDs lead to the introduction of:
callable CDs.
A bank estimates that their average balance on demand deposit accounts is $1,624, net of float. Each account costs the bank $179 per year in processing
costs. The bank collects an average of $8.33 per month on each account in service charges. Assume reserve requirements are 10%. What is the net cost of an average demand deposit?
Correct!
Correct Answer
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
11.68
In regards to repurchase agreements, the margin is:
the difference between the market value of the collateral and the amount of the loan.
A primary difference between "intelligent" smart cards and "memory" smart cards is that:
memory cards can only store information.
___________ includes transaction accounts, MMDAs, savings accounts and small time deposits.
Retail funding
Which of the following would
not
be considered "hot money"?
Retail demand deposits
Which of the following is true regarding money market deposit accounts (MMDAs)?
A maximum of three checks per month may be written on a MMDA account.
Overdraft fees:
represent a risk charge.
Large depositors [
check all that apply
]:
often get free checking.
receive more personalized service.
receive the highest interest rates.
CDs sold at a steep discount from par and appreciate to face value at maturity are known as:
zero coupon CDs.
A bank estimates that their average balance on demand deposit accounts is $1,823, net of float. Each account costs the bank $146 per year in processing costs. The bank collects an average of
$5.29 per month on each account in service charges. Assume reserve requirements are 10%. What is the net cost of an average demand deposit?
ered
8.58
A brokered deposit would most likely take which of the following forms?
Jumbo CDs
Federal funds:
can only be traded by banks.
Which of the following is primarily used as collateral for borrowings from the Federal Home Loan Bank Board?
Real estate loans
Liquidity risk is a function of many factors. Which of the following is NOT one of those factors?
Funding sources.
Given the marginal cost estimates associated with obtaining additional interest-checking account funding in the table below,
what is the estimated marginal cost of obtaining additional interest-checking balances?
[
Please respond in percent without the "%" sign at the end - e.g. if the answer is 12.35%, just respond with 12.35.
]
Market interest rate
2.00%
Servicing costs (as % of balance)
1.88%
Acquisition costs (as % of balance)
0.43%
Deposit insurance costs (as % of balance)
0.22%
Net investable balance
84.45%
Correct!
Correct Answer
5.36
Question 12
0
/ 9
pts
Given the marginal cost estimates associated with obtaining additional interest-checking account funding in the table below,
what is the estimated marginal cost of obtaining additional interest-checking balances?
[
Please respond in percent without the "%" sign at the end - e.g. if the answer is 12.35%, just respond with 12.35.
]
Market interest rate
2.32%
Servicing costs (as % of balance)
2.12%
Acquisition costs (as % of balance)
0.78%
Deposit insurance costs (as % of balance)
0.34%
Required reserves
10.00%
Float
5.39%
You Answered
Correct Answer
6.57
All of the following are true about Federal Home Loan Bank (FHLB) advances except:
Because the FHLB is a government agency, FHLB advances are available to all banks that pay taxes. Liability management decisions determines all ________ following except:
Loan rates
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
Related Questions
Financial accounting solve this question
arrow_forward
Yu.4
arrow_forward
Applying Time Value of Money Concepts
Complete the missing information in the table below. Assume that all bonds pay interest semiannually.
Do not use negative signs with answer.
Round percentages to one decimal place (ex. 0.0345 = 3.5%).
Round all other values to the nearest whole number.
Annual
Yield
Years to
Coupon
Issue
Maturity
Rate
Face value
Proceeds
Firm 1
8.00%
15
7.00%
$500,000 $
Firm 2
3.00%
10
0.00% $
$705,347
Firm 3
6.50%
5.00%
$500,000
$458,353
Firm 4
%
12
3.50%
$1,000,000
$1,114,103
Firm 5
0.80%
20
2.00%
$700,000 $
arrow_forward
H5.
Show proper step by step calculation
arrow_forward
6
arrow_forward
9
arrow_forward
Check my work mode: This shows what is correct or incorrect for the work you have completed so far. It does not indicate com
What is the Macaulay duration of a bond with a coupon of 5.4 percent, nine years to maturity, and a current price of $1,055.40? What is
the modified duration?
Note: Do not round intermediate calculations. Round your answers to 3 decimal places.
Answer is complete but not entirely correct.
Macaulay
Modified
Duration
7.410 x Years
7.082 Years
arrow_forward
Bha
arrow_forward
Give typing answer with explanation and conclusion
arrow_forward
3. Use the data in the following table on Treasury securities of different maturities to solve this
problem:
1 year
2 year
Зуеar
1.25%
2%
2.50%
Assume that the liquidity premium theory is correct. On this day, what did investors expect the
interest rate to be on the one-year Treasury bill two years from that time if the term premium on a
two-year Treasury note was 0.20%, and the term premium on a three-year Treasury note was
0.40%?
arrow_forward
Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000.
Maturity (Years)
1
2
3
4
5
Show Transcribed Text
B) How could you construct a 1-year forward loan beginning in year 3? (Face Value)
C) How could you construct a 1-year forward loan beginning in year 4? (Face Value)
Required A Required B
Complete this question by entering your answers in the tabs below.
Face value
Rate of synthetic loan
→ Show Transcribed Text
Price
$ 970.93
898.39
836.92
How could you construct a 1-year forward loan beginning in year 3?
Note: Round your Rate of synthetic loan answer to 2 decimal places.
Required A
776.20
685.42
Required B
Face value
Rate of synthetic loan
Required C
7.85 %
Required C
How could you construct a 1-year forward loan beginning in year 4?
Note: Round your Rate of synthetic loan answer to 2 decimal places.
Ċ
13.29 %
arrow_forward
Financial Accounting
arrow_forward
Suppose you purchase solution this question general accounting
arrow_forward
mni.3
arrow_forward
Interest Expense
Discount on Bonds Payable v
Cash v
Feedback
V Check My Work
The straight-line method of amortization provides equal amounts of amortization over the life of the bond.
3. Determine the total interest expense for 20Y1. Round to the nearest dollar.
$
4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest?
Yes
5. Compute the price of $5,946,703 received for the bonds by using the present value tables in Appendix A. Round your PV values to 5 decimal places and the final
answers to the nearest dollar. Your total may vary slightly from the price given due to rounding differences.
Present value of the face amount
$
Present value of the semiannual interest payments
Price received for the bonds
2$
00
arrow_forward
The prices of zero-coupon bonds with various maturities are given:
maturity in years
price
1
975.66
2
885.89
3
821.92
4
759.20
5
670.20
A) How could you construct a 1-year forward loan beginning in year 3?
face value = ?
rate of synthetic loan = ?
B) How could you construct a 1-year forward loan beginning in year 4?
face value = ?
rate of synthetic loan = ?
arrow_forward
Pls provide step by step answer
arrow_forward
hi can someone please help me with this problem?
arrow_forward
t14
arrow_forward
DO not Answer Question 1-6, Only below question A-C needed.
21. Consider the following balance sheet (in millions) for an FI:
Assets Liabilities
Duration = 10 years $950
Duration = 2 years $860
Equity $90
What is the FI's duration gap?
What is the FI's interest rate risk exposure?
How can the FI use futures and forward contracts to put on a macrohedge?
What is the impact on the FI's equity value if the relative change in interest rates is an increase of 1 percent? That is, DR/(1+R) = 0.01.
Suppose that the FI in part (c) macrohedges using Treasury bond futures that are currently priced at 96. What is the impact on the FI's futures position if the relative change in all interest rates is an increase of 1 percent? That is, DR/(1+R) = 0.01. Assume that the deliverable Treasury bond has a duration of nine years.
If the FI…
arrow_forward
Quantitative Problem:
Today, interest rates on 1-year T-bonds yield 1.3%, interest rates on 2-year T-bonds yield 2.3%, and interest rates on 3-year T-bonds yield
3.7%.
a. If the pure expectations theory is correct, what is the yield on 1-year T-bonds one year from now? Be sure to use a geometric average in
your calculations. Do not round intermediate calculations. Round your answer to four decimal places.
%
1.3
Show All Feedback
b. If the pure expectations theory is correct, what is the yield on 2-year T-bonds one year from now? Be sure to use a geometric average in
your calculations. Do not round intermediate calculations. Round your answer to four decimal places.
2.4
%
Show All Feedback
c. If the pure expectations theory is correct, what is the yield on 1-year T-bonds two years from now? Be sure to use a geometric average in
your calculations. Do not round intermediate calculations. Round your answer to four decimal places.
3.8
Show All Feedback
arrow_forward
Quantitative Problem: Today, interest rates on 1-year T-bonds yield 1.7%, interest rates on 2-year T-bonds yield 2.5%, and interest rates on 3-year T-bonds yield 3.4%. a. If the pure expectations theory is correct, what is the yield on 1-year T-bonds one year from now? Be sure to use a geometric average in your calculations. Do not round intermediate calculations. Round your answer to four decimal places.
b. If the pure expectations theory is correct, what is the yield on 2-year T-bonds one year from now? Be sure to use a geometric average in your calculations. Do not round intermediate calculations. Round your answer to four decimal places.
c. If the pure expectations theory is correct, what is the yield on 1-year T-bonds two years from now? Be sure to use a geometric average in your calculations. Do not round intermediate calculations. Round your answer to four decimal places.
arrow_forward
Financial Accounting Question need answer please
arrow_forward
Bond Valuation and Interest Rate Risk
The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year.
What will be the value of each of these bonds when the going rate of interest is 4%? Assume that there is only one more interest payment to be made on Bond S. Do not round intermediate calculations. Round your answers to the nearest cent.
Bond L: $
Bond S: $
What will be the value of each of these bonds when the going rate of interest is 10%? Assume that there is only one more interest payment to be made on Bond S. Do not round intermediate calculations. Round your answers to the nearest cent.
Bond L: $
Bond S: $
What will be the value of each of these bonds when the going rate of interest is 13%? Assume that there is only one more interest payment to be made on Bond S. Do not round intermediate calculations. Round your answers to the nearest cent.…
arrow_forward
Please given correct answer financial accounting
arrow_forward
SEE MORE QUESTIONS
Recommended textbooks for you

Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,



Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,

Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education
Related Questions
- Financial accounting solve this questionarrow_forwardYu.4arrow_forwardApplying Time Value of Money Concepts Complete the missing information in the table below. Assume that all bonds pay interest semiannually. Do not use negative signs with answer. Round percentages to one decimal place (ex. 0.0345 = 3.5%). Round all other values to the nearest whole number. Annual Yield Years to Coupon Issue Maturity Rate Face value Proceeds Firm 1 8.00% 15 7.00% $500,000 $ Firm 2 3.00% 10 0.00% $ $705,347 Firm 3 6.50% 5.00% $500,000 $458,353 Firm 4 % 12 3.50% $1,000,000 $1,114,103 Firm 5 0.80% 20 2.00% $700,000 $arrow_forward
- Check my work mode: This shows what is correct or incorrect for the work you have completed so far. It does not indicate com What is the Macaulay duration of a bond with a coupon of 5.4 percent, nine years to maturity, and a current price of $1,055.40? What is the modified duration? Note: Do not round intermediate calculations. Round your answers to 3 decimal places. Answer is complete but not entirely correct. Macaulay Modified Duration 7.410 x Years 7.082 Yearsarrow_forwardBhaarrow_forwardGive typing answer with explanation and conclusionarrow_forward
- 3. Use the data in the following table on Treasury securities of different maturities to solve this problem: 1 year 2 year Зуеar 1.25% 2% 2.50% Assume that the liquidity premium theory is correct. On this day, what did investors expect the interest rate to be on the one-year Treasury bill two years from that time if the term premium on a two-year Treasury note was 0.20%, and the term premium on a three-year Treasury note was 0.40%?arrow_forwardSuppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Show Transcribed Text B) How could you construct a 1-year forward loan beginning in year 3? (Face Value) C) How could you construct a 1-year forward loan beginning in year 4? (Face Value) Required A Required B Complete this question by entering your answers in the tabs below. Face value Rate of synthetic loan → Show Transcribed Text Price $ 970.93 898.39 836.92 How could you construct a 1-year forward loan beginning in year 3? Note: Round your Rate of synthetic loan answer to 2 decimal places. Required A 776.20 685.42 Required B Face value Rate of synthetic loan Required C 7.85 % Required C How could you construct a 1-year forward loan beginning in year 4? Note: Round your Rate of synthetic loan answer to 2 decimal places. Ċ 13.29 %arrow_forwardFinancial Accountingarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education

Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,



Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,

Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education