Week 3 Chart

Commercial banks increase their reserves after the Fed increases the interest rate it pays on reserves. Which of the columns above could represent this action?

41) Sweep accounts A) have made reserve requirements nonbinding for many banks. B) sweep funds out of deposit accounts into long-term securities. C) enable banks to avoid paying interest to corporate customers. D) reduce banks' assets. 42) Since 1974, commercial banks importance as a source of funds for nonfinancial borrowers A) has shrunk dramatically, from around 40 percent of total credit advanced to around 25 percent by 2011. B) has shrunk dramatically, from around 70 percent of total credit advanced to below 50 percent by 2011. C) has expanded dramatically, from around 50 percent of total credit advanced to above 70 percent by 2011. D) has expanded dramatically, from around 30 percent of total credit advanced to above 50 percent by 2011. 43) Thrift institutions importance as a source of funds for borrowers A) has shrunk from around 40 percent of total credit advanced in the late 1970s to below 30 percent by 2011. B) has shrunk from over 20…

Please answer “d” and “e” below.

Suppose you examine the central bank's balance sheet and observe that since the previous day, reserves had fallen by $100 million. In addition, on the asset side of the central bank's balance sheet, securities had fallen by $100 million. Do you think the size of the banking system's balance sheet would be affected immediately by these changes to the central bank's balance sheet? O Yes O No Explain your answer. Reserves appear on the (Click to select) side and securities appear on the Click to select) side of the banking system's balance sheet and so the changes would affect the (Click to select) of its balance sheet.

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UANG Financials is quite certain that interest rates are going to decrease next month.  How should the bank manager adjust the bank’s maturity gap to increase its equity value when interest rates decrease ? Group of answer choices The bank should set its maturity gap to a positive position. In this case, as rates decrease, market value of assets will increase by less than the increase in market value of liabilities. The bank should set its maturity gap to a negative position. In this case, as rates decrease, market value of assets will decrease by less than the decrease in market value of liabilities. The bank should set its maturity gap to a negative position. In this case, as rates decrease, market value of assets will decrease by more than the decrease in market value of liabilities. The bank should set its maturity gap to a positive position. In this case, as rates decrease, market value of assets will increase by more than the increase in market value of…

XYZ bank currently has 600 million in transaction deposits on its balance sheet. The current reserve requirement, set by the central bank, is 8%. The central bank has decided to increase the reserve requirement from 8% to 10%. Show the effect of their decision on: Required reserve. Excess reserve. Change in bank deposit.

To assist with the economic recovery in the aftermath of 2008/2009 and 2020 recessions, the Federal Reserve engaged in Large Scale Asset Purchases. The Large Scale Asset Purchases    a included buying billions of US Treasury bonds   b included buying billions of Mortgage-Backed Securities   c is considered to be an unconventional tool of the Federal Reserve   d All of the above

Dureing the recession of 2006-2009, Goldman Sachs changed their banking charter from an Investment Bank to a Commercial Bank to have access to the Federal Reserve Discount Window to avoid bankrupcy. O True O False

ASAP For some months now, the central bank has reduced the attention it pays to the levels ofinterest rates and has kept a close eye on expansion of the money supply. This policy change has made market interest rates more responsive to the high rate of inflation. a. Why would this policy change have caused interest rates to become more responsive to the high rate of inflation? b. Is this a good or a bad thing?

Why have the use of standby credit letters grown in recent years? A. The growth of bank loans sought by companies in recent years B. The decreased demand for risk reduction devices C. The rapid growth of direct financing by companies D. The high cost of standby credit letters in recent years

As the 2008–2009 financial crisis unfolded, one major U.S. bank had a leverage ratio of 50.In Canada, regulators put a ceiling of 20 on bank leverage ratios. Compare the change inasset values that would push the capital in the U.S. bank to zero with the change requiredto eliminate capital in a Canadian bank at the ceiling-leverage ratio. What is the implicationof the differences in maximum leverage ratios for the stability of the banking system?

People's Bank of China boosts liquidity with open market operations The People's Bank of China, China's central, conducted an open market operation that injected 270 billion yuan into China's banking system. Suppose People's Bank of China buys 20 billion yuan of government securities from ICBC. Show how the transaction changes the balance sheets by filling in the numbers. Source: www.chinadaily.com.cn and finance.yahoo.com, October 8, 2018. In the open market operation described in the news clip, explain whether the People's Bank of China buys or sells People's Bank of China securities. Assets Liabilities (billions of yuan) (billions of yuan) The People's Bank of China securities because Securities Reserves of ICBC A. buys; money is being injected into the banking system ICBC O B. sells; interest rates are falling Assets Liabilities C. buys; an open market operation by definition is a purchase of securities (billions of yuan) (billions of yuan) Securities O D. sells; money is being…

To assist with the economic recovery in the aftermath of 2008/2o09 and 2020 recessions, the Federal Reserve engaged in Large Scale Asset Purchases. The Large Scale Asset Purchases O included buying billions of US Treasury bonds included buying billions of Mortgage-Backed Securities is considered to be an unconventional tool of the Federal Reserve All of the above

discuss the rationale behind the introduction of negative interest rate policies across economies worldwide. discuss the effect of increasing the amount paid upfront when corporations make capital purchases focusing on benefits and drawbacks  discuss the significance of including the factor of inflation in corporate finance calculation

Suppose that during a certain week the Fed announces a new monetary growth policy, Congress surprisingly passes legislation restricting imports of foreign automobiles, and Ford comes out with a new car model that it believes will increase profits substantially. How might you go about measuring the market’s assessment of Ford’s new model?

In 2008, the United States began to witness one of the worst recessions since the 1930s. The collapse of the housing bubble in 2006 led to a massive decline in real estate prices, affecting consumers and institutions, especially banking and financial entities. Severe liquidity shortfalls in the United States as well as other global markets led to a serious credit crisis. During the credit crisis of 2008-2009, several banks and other businesses went through a reorganization process or were forced to liquidate. Consider the following example: In January 2009, American electronics retailer Circuit City Inc. closed all of its stores and sold all of its merchandise. Source: "Circuit City to Shut Down." CNN Money. Cable News Network, n.d. Web. August 31, 2010. http://money.cnn.com/2009/01/16/news/companies/circuit_city This is an example of: O Reorganization O Liquidation

FORD Company Background: What industry the firm is in, its products, its competitors, and the stated main reason for needing capital (to fund receivables, capacity expansion, retire older debt, etc.). If you can't find a specific discussion about this, then use your judgment as to why you think the funds were needed and explain your reasoning. FORD CO. Balance Sheets: What did the balance sheet look like in the quarter just prior to issuing the bond FORD MOTOR CO.DL-NOTES 1999(29)? Include both a copy from before the issue and after the issue in an appendix. From the "Key Financial Ratios" , calculate Return on Equity (ROE), one debt ratio, and at least one other ratio of your choice both before and after the bonds were issued, and discuss what the results indicate and why you think they are important. FORD CO. Trends in YTM and Price: At what price and yield-to-maturity (YTM) was the initial FORD MOTOR CO.DL-NOTES 1999(29) offering sold? Tabulate the price and YTM of the issue at the…

6. If the U.S. runs a current account deficit next year, which of the following are necessarily true: A) U.S. will have to run a government budget deficit B) The Central Bank of China will have to buy U.S. treasury bonds C) The U.S. will import more goods and services than it exports D) U.S. national saving will be less than U.S. national investment

Reserve requirements effectively impose a tax on bank deposits that reduce profits.  Why does this tax increase as interest rates rise? A. As interest rates rise, banks could earn more money by lending reserves to borrowers.  These profits are limited by the reserve requirement, and the foregone profits increase as the interest rate rises.   B. States tend to increase franchise fees on banks as interest rates rise   C. The Fed always increases the reserve requirement as interest rates rise   D. Banks earn more money as interest rates increase, so their state and federal income taxes increase.