Changes in interest rates may change the market values of the bank's assets and liabilities by different amounts is a Select one: O a. Spread Risk O b. Refinancing risk O c. Reinvestment risk Od.

Q: Decreasing the amount of liquid assets held for the purpose of meeting loan demands and deposit…

A: Liquidity management is a strategy where the business plans to meets its short-term obligations…

Q: (a. investment banking   b. insurance firms  c. commercial banking d. mutual fund  e. pension fund)…

A: The correct answer is commercial banking as banks are the transformer of short term liabilities to…

Q: If a bank is exposed to refinancing risk, its profitability is higher if interest rates and if it is…

A: Refinancing risk refers to the risk that a bank's cost of funding (such as the interest rates it…

Q: What differences between the daily market valuation of a traditional security and the valuation…

A: There is need of proper valuation of security there many methods of valuation.

Q: A.Discuss three factors that affect net interest income.B.What are the objectives of the Basel III…

A: Net interest income is the difference between the revenue that is generated from a bank's assets and…

Q: decrease in reserve requirements could lead to an    A. increase in bank lending.   B. increase…

A: The Money supply and demand of money is affected by reserve requirement of bank which are placed by…

Q: It is an average interest rate that banks offer in the financial market: a. effective rate b.…

A: Effective Rate: It is the interest rate on a loan provided or financial security restated from the…

Q: Having longer-maturity assets than liabilities causes banks to bear which of the following risks? I.…

A: a risk is an uncertain event that will occur or non-occurring and implies future uncertainty and…

Q: How does a bank try to achieve the best possible risk adjusted return on its overall loan portfolio?

A: The possibility of a loss arising from a borrower's inability to repay a loan or meet legally…

Q: The following is true for banks managing interest rate risk:     In refinancing risk, banks gain…

A: Step 1 The ability of the bank or financial institution to refinance the matured liabilities at very…

Q: The financial performance of both Commercial Banks and Savings Banks is measured using the Net…

A: The net interest margin is referred as the net benefit of lending which derived from the lending and…

Q: nterest rate swaps and gap analysis to manage interest rate risk.

A: There are two methods in which a bank can manage its interest rate risk  (a) by matching the…

Q: Loans Loan Expected Standard Amount Return Deviation A $ 15 8.1% 1.1% million В $ 15 9.2% 1.3%…

A: The following solution is given below:

Q: Value at Risk (VaR) is a statistical measure of maximum loss used by banks and other financial…

A: Value at Risk is a technique used by institutions to analyze the potential risk assessed in the…

Q: The business holds cash, treasury notes, and corporate bonds. It is exposing itself to interest rate…

A: Since business is exposing itself to interest rate risk, it is ready to bear or accept risk.

Q: 1. Which one of the following is not a money market security: a. Treasury Bill. b. REPO. c. LIBOR.…

A: Money market securities are short term securities or instruments generally issued by government,…

Q: A bank's net interest margin represents the proportion of its investments that are financed with…

A: The difference between interest paid and interest received, adjusted for the entire amount of…

Q: What is the main reason for the yield differences between treasury bond yield and corporate bond…

A: A treasury bond is issued by the government and is backed by the treasury whereas a corporate bond…

Q: FINANCIAL RISK MANAGEMENT  1. Duration is a measure of interest rates risk. (True/ False) 2. Bond…

A: The answers and explanations are provided below:

Q: Are there any advantages to the equity-holders of banks from them engaging in short-term as opposed…

A: Equity holders enjoy the return from two sources i.e. from the company's end in the form of a…

Functions of Financial Institutions

Financial institutions are businesses that are formed to deal with financial and monetary transactions. These organizations primarily accept deposits, advance loans, make investments, and provide foreign exchange services. Financial institutions include, but are not limited to, banks, insurance companies, trust companies, brokerage firms, and investment bankers. Because financial institutions play such an important role in the economy in terms of monetary transactions, regulating their activities has become a requirement for governmental authorities. As a result, the government creates a multitude of laws and regulations to oversee the activities of financial institutions.