A bank has the following balance sheet: Market LIAB. & Market ASSETS Yield Duration Yield Duration Value EQUITY Value 1-yr Time Cash 86 607 4.9% 0.5 deposit 3-yr Commercial 791 8.3% 2.9 3-yr CD 200 5.0% 3.0 loan 6-yr Treasury 155 4.4% 3.6 Equity ??? bond ???? ???? 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). 36.94
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- 5. Definitions: Pick 5 and define, describe why each matter, provide an example Define Describe why it matters Term Time value of money Passive income Net Worth Credit Score/Credit rating Risk Evaluation Stocks bonds Gross income v. Net income Mutual funds ETFs Index funds RRSP Consumer Debt OSAP Example(s)Consider the following balance sheet Expected Balance Sheet for XYZ Bank Assets Yield Liabilities Cost Rate sensitive $ 1300 8% %$4 1700 8% Fixed rate $500 9% $1500 5% Non earning $ 5100 $. 1800 Equity 1900 Total $ 6900 $6900 What is the Net Interest Margin (NIM)Answer the following statements It is an average interest rate that banks offer in the financial market: a. effective rate b. Cetes c. CPP d. TIIE It is the payment for the use of someone else's money: a. simple interest b. interests c. amount d. interest rate
- Identify under which one of the following market the issue of treasury bills lies: a.Equity Market b.Capital Market c.Foreign Currency Market d.Money Market **fast plz1)What is meantby : a.individual banking b.institutional banking c.global banking 2)Explain each of the following reserve ratio and required reservesIdentify under which one of the following market the issue of treasury bills lies: a.Equity Market b.Capital Market c.Foreign Currency Market d. **fast i dont have time plzMoney Market
- Which of the following is an example of a money market instrument? (Select all that apply) a. 2-year Treasury Bond b. Certificate of Deposit C. Swap d. Stop-callFor each of the unrelated transactions described below, present the entries required to record each transaction. Flounder Corp. issued $18,800,000 par value 11% convertible bonds at 99. If the bonds had not been convertible, the company's investment banker estimates they would have been sold at 95. 1. 2. 3. Culver Company issued $18,800,000 par value 11% bonds at 98. One detachable stock purchase warrant was issued with each $100 par value bond. At the time of issuance, the warrants were selling for $4. Suppose Sepracor, Inc. called its convertible debt in 2020. Assume the following related to the transaction. The 12%. $10,100,000 par value bonds were converted into 1,010,000 shares of $1 par value common stock on July 1, 2020. On July 1. there was $52,000 of unamortized discount applicable to the bonds, and the company paid an additional $75,000 to the bondholders to induce conversion of all the bonds. The company records the conversion using the book value method.Consider the relative liquidity of the following assets: Assets 1. A bond issued by a publicly traded company 2. The funds in a money market account 3. A $20 bill 4. Your truck Select the assets in order o Most Liquid Second-Most Liquid Third-Most Liquid Least Liquid Bond 520.00 bill Truck Funds held in a money market account quid.
- Consider a bank with the following balance sheet (Shown in image):a) Calculate the equity (total asset – total liability) to asset ratio of the bank(Hint: equity to asset ratio = total equity/total asset) b) Calculate the duration and convexity of the both asset and liability sides; c) If the interest rates go up by 1%, using the duration and convexity rule to determine the networth of the bank and the equity to asset ratio; d) In c)’s scenario, to maintain the equity to asset ratio at 40% which is required by the regulation,the bank decides to raise cash (zero duration and zero convexity) from the equity holders.How much cash does the bank need to raise? e) Do you agree with the following statement? Explain why. “The information about a bond’s duration and convexity adjustment is sufficient to quantifyinterest rate risk exposure.”Using the image attached: a) Calculate the equity (total asset – total liability) to asset ratio of the bank(Hint: equity to asset ratio = total equity/total asset)b) Calculate the duration and convexity of the both asset and liability sides;c) If the interest rates go up by 1%, using the duration and convexity rule to determine the networth of the bank and the equity to asset ratio; d) In c)’s scenario, to maintain the equity to asset ratio at 40% which is required by the regulation,the bank decides to raise cash (zero duration and zero convexity) from the equity holders.How much cash does the bank need to raise?e) Do you agree with the following statement? Explain why. “The information about a bond’s duration and convexity adjustment is sufficient to quantifyinterest rate risk exposure.Calculate the interest rate using following information (Enter your answer in percentage. Round your answer to 2 decimal places): Administrative costs Cost of debt Cost of equity Probability of loss The average reserve requirement Capital policy 2% 4% 5% 0.65% 5% 90% debt capital, 10% equity capital 2