Homework 6_Bank Management

13. An analyst developed two scenarios with respect to the recovery of $100,000 príncipal C. the total from defaulted loans: Probability of Amount (%) Amount Probability of Scenario (%) Recovered ($) Scenario 40 50,000 60 1 30,000 40 60 80,000 90 60,000 10 The amount of the expected recovery is closest to: A. $36,400. B. $63,600. C. $81,600.

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First National Bank   Assets Liabilities Rate-sensitive $80 million $50 million Fixed-rate $20 million $50 million according to the above balance sheet, if interest rates rise by 5 percentage points, say, from 10 to 15%, bank profits (measured using gap analysis) will increase by $___ million (put a negative sign if it is a decrease)

First National Bank   Assets Liabilities Rate-sensitive $80 million $50 million Fixed-rate $20 million $50 million According to the above balance sheet, if interest rates rise by 5 percentage points, say, from 10 to 15%, bank profits (measured using gap analysis) will increase by $        million (put a negative sign if it is a decrease).   Question 34 options:

Number of Loans Principal 50 100 50 100,000 250,000 300,000 Rate 4.25% 5% Maturity 360 180 360 If these 200 loans are pooled to create a MPT, what is the starting pool balance in dollars? Assume the loans are not seasoned before securitization.

i will 10 upvotes urgent Suppose you are the manager of a bank whose $100 billion of assets have an average duration of 5 years and whose $90 billion of liabilities have an average duration of 3 years. Conduct a duration analysis for the bank, and show what will happen to the net worth of the bank if interest rates rise by 2 percentage points. What actions could you take to reduce the bank’s interest-rate risk?

Rate-sensitive Fixed-rate Assets $20 million $80 million Liabilities $50 million $50 million 9) If interest rates rise by 5 percentage points, say, from 10 to 15%, bank profits (measured using gap analysis) will (Show your calculation) A) decline by $0.5 million. B) decline by $1.5 million. C) decline by $2.5 million. D) increase by $1.5 million.

Q1. A $200,000 loan amortized over 14 years at an interest rate of 10% per year requires payments of $21,215.85 to completely remove the loan when interest is charged on the unrecovered balance of the principal. If interest is charged on the original principal instead of the unrecovered balance, what is the loan balance after 14 years provided the same $21,215.85 payments are made each year?     The loan balance is $ .

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QUESTION 5 A bank with $10,000 in assets has ROA =2% and ROE =10%. What is its leverage ratio (TA/Equity)?     2.5       5           4       1.25          QUESTION 6 The expected loss of a loan is a function of the following, except     Unexpected loss         Loss given default        Exposure at default       Probability of default

CH 3. #8 a An investment with an internal rate of return of 0.25 has the following cash flows: Time Cash flow 0 C0 1 +$8,000 2 +10,000 The value of C0 is___. b If the firm financed the investment in (a) with debt costing 0.25, the debt amortization table (using the funds generated by the investment to repay the loan) would be

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Financial Accounting Question of the Higher fill Answer

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21' Assets Reserves Securities Loans Your bank has the following balance sheet: $ 50 million. 50 million 150 million Liabilities Checkable deposits $200 million Bank capital If the required reserve ratio is 20%, what impact would an unexpected deposit outflow of $50 million have on the bank's balance sheet? That is, what would the new balance sheet look like? Does the bank have a liquidity issue? Explain. Describetwo actions that you might recommend the bank manager take if there is an unexpected deposit outflow of $50 million? What option would you least prefer to use of all the possible actions a bank might take? 50 million.

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1. Assume the company uses the AFN formula and all  additional funds needed (AFN) will come from issuing new long-term debt. Given its forecast, how much long-term debt will the company have to issue in 2023?

QUESTION 5 The following balance sheet is available for Smith Bank (in millions). Which of the following is true?           Assets Potential Potential Amount Liabilities Potential Potential Amount   Rate Withdrawal in   Rate Withdrawal in   Change 6-month millions   Change 6-month millions 90-day Treasury Bills 0.50%   $25 30-day CDs 0.25%   $50 180-day Treasury Bills 0.75%   $35 90-day CDs 0.35%   $100 1-year Treasury Bills 1.00%   $50 Savings Deposits 0.10%   $50 1-year consumer loans 1.25% 20% $200 Time-Deposits 180-day 0.60%   $200 5-year Consumer loans 1.50% 20% $150 Time Deposits -2 years 1.00% 30% $235 10-year Corporate Loans 1.75% 15% $250 Stockholder's equity     $75     Total $710     Total $710     Including potential withdrawals and excluding savings deposits, the six-month earnings at risk is $238,750…

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| Suppose that FirstBank has the following simplified balance sheet. Assume that all other components of the balance sheet are equal to zero. Assets Liabilities reserves 3,920 demand deposits 32,000 loans 28,080 32,000 32,000 Assume that the reserve ratio is r= .10 (10%). a. Does FirstBank have excess reserves? If so, of how much? b. Suppose that FirstBank desires to hold no excess reserves, so it loans out its excess reserves to borrowers. How does the balance sheet change? Either use T-accounts or a new balance sheet to show. c. Starting back in a), what is the maximum deposit outflow that FirstBank can sustain without affecting other parts of the balance sheet?

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