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Which of the following is defined as the level of capital that allows banks to sustain the potential losses arising from all current risks and to comply with an acceptable solvency level. a. Asset liquidity b. Capital adequacy c. Liquidity position of a bank d. Market liquidity

Which of the following should a bank do if they wish to engage in both security rating and investment banking? Group of answer choices a. Restrict prepublication of analyst reports to research personnel only b. Base compensation for analysts on positive ratings of securities c. Place analysts in the supervisory organization under sales personnel d. All of the above

Which of the following statements about transaction costs and financial intermediation is not true?   A. Low transaction costs allow banks to offer diversified assets to their customers   B. Low transaction costs allow banks to offer liquidity services   C. Low transaction costs are due to diseconomies of scale in financial intermediation   D. Low transaction costs allow banks to engage in risk sharing

Which of the following has caused banks difficulty in estimating liquidity needs?A. competition for loans from other financial institutionsB. deregulation of interest rate ceilings on depositsC. competition for loans from nonfinancial institutionsD. a, b, and c

24. Financial institutions that cut back on their lending are engaged in A) liability management B) deleveraging C) financial innovation. D) torsion control 25. Instruments which provide payments to holders of bonds in the event of default are known as A) collateralized bond obligations B) tertiary payment devices C) credit default swaps D) mortgage-backed securities

H1.

A bank that grants loans to firms in a many different lines of business:  will increase its information cost and decrease its credit risk will increase both its information cost and its credit risk will decrease its information cost and decerase its credit risk will decrease its information costs and increase its credit risk

If ABC Bank’s ALCO targets the market value of shareholders’ equity in its interest rate risk management, is the bank positioned to gain or lose if interest rates fall?b. If interest rates rise by 1% for all assets and liabilities, what is the approximate expected change in the bank’s economic value of equity?c. Provide a specific transaction that the bank could implement in order to immunize its interest rate risk exposure.

Which of the following is most consistent with using debt to reduce agency costs or conflicts?   Question 11 options:   Increasing debt reduces a firm’s business risk   The interest paid on debt reduces taxable income and income taxes   The interest paid on debt reduces cash that management of a firm might otherwise waste or use poorly   The issuance of debt helps firms increase their credit rating

The business holds cash, treasury notes, and corporate bonds. It is exposing itself to interest rate risk. Identify whetherA. AvoidanceB. MitigationC. Acceptance

If a company is worried about having enough cash to pay interest to their bondholders, rent to their landlords and wages to their employees. they are having:a. Solvency issuesb. Liquidity issuesc. Duration matching issues

A company has received a loan from a bank with certain debt covenants that require the company to maintain specific financial ratios. Discuss the potential impact of these covenants on the company's financial statements and the steps the company can take to ensure compliance. What are the consequences of violating debt covenants? How can the company negotiate with the bank to modify the covenants if necessary?