(b) Which of the following describes how to find the first full year in which subprime lending falls below$4 billion using the given information? Select the correct choice below and fill in the answer box tocomplete your choice.(Type an integer or a decimal.)A To find the first full year in which subprime lending falls below $4 billion, find the intersection-0.15x and yThe x-coordinate represents the number ofpoint of the graphs y=299.2e7years since 2000 and the first full year in which subprime lending falls below $4 billion.B. To find the first full year in which subprime lending falls below $4 billion, substituteevaluate to find g(x).The first full year in which subprime lending falls below $4 billion isfor x and The amount of money (in billions of dollars) lent to customers with credit scores below 620 for subprimemortgages can be approximated by the function g(x) = 299.2e-0.15x, where x = 1 corresponds to theyear 2001.(a) Find the value of subprime mortgage lending in 2011 for the described customer base.(b) If the trend continues, what is the first full year in which subprime lending falls below $4 billion?(a) Which of the following describes how to find the value of subprime mortgage lending in 2011 usingthe given information? Select the correct choice below and fill in the answer box to complete your choice.(Type an integer or a decimal.)A. To find the value of subprime mortgage lending in 2011, substituteg(x).for x and evaluate to findB. To find the value of subprime mortgage lending in 2011, find the intersection point of the graphsy=299.2e-0.15x and y=. The vahre of subprime mortgage lending in 2011 is representedby the y-coordinate.In 2011, the assets are about $ billion.(Type an integer or decimal rounded to the nearest hundredth as needed.)(b) Which of the following describes how to find the first full year in which subprime lending falls below$4 billion using the given information? Select the correct choice below and fill in the answer box tocomplete your choice.

Subprime Mortgages:Subprime mortgages refer to home loans provided to borrowers with a higher risk…

Answered: he amount of money (in billions of…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Consider two local banks. Bank A has 87 loans outstanding, each for $1.0 million, that it expects will be repaid today. Each loan has a 3% probability of default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $87 million outstanding, which it also expects will be repaid today. It also has a 3% probability of not being repaid. Calculate the following: a. The expected overall payoff of each bank. b. The standard deviation of the overall payoff of each bank. a. The expected overall payoff of each bank. The expected overall payoff of Bank A is $ million. (Round to the nearest integer.)
Suppose that over the next year, one of three things could happen to a company's credit rating. It could remain investment grade, drop to non-investment grade or default. The value of a credit derivative that pays $100 in 1-year if the company's credit rating remain investment grade is $93. The value of a credit derivative that pays $200 in 1-year if the company's credit rating drops to non-investment grade is $7. The value of a credit derivative that pays $300 in 1-year if the company defaults is $6. Calculate the risk-free rate and the risk-neutral probability of default. (answers to 4 decimal places)
Consider two 1-year loans with a principal of $1 million and a default probability of 2% each. Assume that if one loan defaults, the other does not. Assume that in the event of default, the loan leads to a loss that can take any value between $0 and $1 million with equal probability, i.e., the probability that the loss is higher than $x million is 1-x. If a loan does not default, it yields a profit equal to $0.02 million. a) Compute the 1-year 99% Value at Risk (VaR) and Expected Shortfall (ES) of a single loan. b) Compute the 1-year 99% VaR and ES for the portfolio of both loans. c) Does the VaR and the ES satisfy the subadditivity property in this case?
Please answer the following showing detailed working: Bruce & Co. expects its EBIT to be $100,000 every year forever. The firm can borrow at 11 percent. Bruce currently has no debt, and its cost of equity is 18 percent. The tax rate is 31 percent. Given the above information; a) Complete the table given below for varying levels of debt below by using a mix of the given information and using your own computations. EBIT $100,000.00 Cost of debts 11% cost of equity when unlevered 18% Tax rate 31% Debts $0 $10,000.00 $20,000.00 $30,000.00 Cost of Equity when levered Equity D/E Vu VL WACC b) Plot the results from the table into the following two graphs:i) Value of the firm vis-à-vis- Total debtii) Cost of capital of the firm vis-à-vis D/E ratio.iii) Which MM propositions have you demonstrated?
You own a home that was recently appraised for $330,000. The balance on your existing mortgage is $117,450. If your bank is willing to loan up to 70% of the appraised value, what is the potential amount (in $) of credit available on a home equity loan?
The rate quoted by Big Bank on a car loan is 8 percent. The annual rate of inflation is currently 1.5 percent. What is the approximate real interest rate paid by the consumer on this loan?
Explain well with proper step by step Answer.
After a 1 year investment you receive 7.5% interest (nominal) from your bank. However, looking at how prices have changed, you soon realize that the real rate of interest was actually 1.6%. How much was inflation during that year? Enter your answer as a percentage, rounded to 2 decimals, and without the percentage sign ('%'). For example, if your answer is 0.02345, then enter 2.35
Optimizing economic agents use the real interest rate when thinking about the economic costs and returns of a loan. Suppose the average rate paid by banks on savings accounts is 0.45% at a time when infialion is around 0 9% For the average saver, the real rate of interest on his or her savings is % (Round your response to two decimal places and use a minus sign if necessay.) Il banks expect that the rate of inflation in the coming year will be 3.9% and they want a real return of 8% on a certain category of loans, then the nominal rate they should charge borrowers on those loans is %. (Round your response to two decimal places) 11 the economy experiences an unexpectedly high rate of inflation, the group that would tend to benefit is O A. creditors (people or institutions that are owed money). O B. deblors (pcople or businesses who owe moncy). OC. both would benefit cgqually O D. neilher bencfits.
Consider two local banks. Bank A has 77 loans outstanding, each for $1.0 million, that it expects will be repaid today. Each loan has a 4% probability of default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $77 million outstanding, which it also expects will be repaid today. It also has a 4% probability of not being repaid. Calculate the following: a. The expected overall payoff of each bank. b. The standard deviation of the overall payoff of each bank.

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