QUESTION 1 a. NewBank started its first day of operations with ¢ó million in capital. ¢100 million in checkable deposits is received. The bank issues a C25 million commercial loan and another ¢25 million in mortgages, with the following terms: Mortgages: 100 standard 30-year, fixed- rate with a nominal annual rate of 5.25% each for ¢250,000. Commercial loan: 3-year lban, simple interest paid monthly at 0.75%/month. If required reserves are 8%, what does the bank balance sheets look like? Ignore any ban koss reserves. b. How do the concepts of adverse selection and moral hazard explain the credit risk management principles that banks adopt?

QUESTION 1 a. NewBank started its first day of operations with ¢ó million in capital. ¢100 million in checkable deposits is received. The bank issues a C25 million commercial loan and another ¢25 million in mortgages, with the following terms: Mortgages: 100 standard 30-year, fixed- rate with a nominal annual rate of 5.25% each for ¢250,000. Commercial loan: 3-year lban, simple interest paid monthly at 0.75%/month. If required reserves are 8%, what does the bank balance sheets look like? Ignore any ban koss reserves. b. How do the concepts of adverse selection and moral hazard explain the credit risk management principles that banks adopt?

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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A firm is borrowing $1 million to expand its operations. The annual interest on the loan is 13% and the loan will be repaid in quarterly installments over the next for ten years. What will the quarterly payments be? Select one: A. $43,262 B. $44,246 C. $45,028 D. $58,492
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9. A company borrows 1,000,000 at an annual effective discount rate of 4%. The loan is to be repaid with n annual payments of 100,000 plus a drop payment one year after the nth payment. The first payment is due two years after the loan is taken out. Calculate the amount of the drop payment. A 87.072.14 B 90,700.14 C 94,479.31 D 98,415.95 E 99,999.99
A company borrows $100,000 with interest at j₁2 = 9%. The loan is to be amortized by monthly payments of $1550 for as long as necessary. A final smaller payment will be calculated so the loan will be exactly repaid. The outstanding balance immediately after the th th 88 payment is $796.44. What is the value of the 89" and final payment? O A. $790.51 B. $796.44 C. $802.41 D. $808.43
A bank makes a 5-year $75,000 loan with no principal payments in years 1-2 and principal payments of $25,000 in Years 3, 4 and 5. The interest rate is 8% and will be paid every year. What interest and principal is paid in year 4 A $6,000 + $25,000 B $6,000+$50,000 C $4,000+$25,000 D $4,000+$50,000
M7
On its savings accounts, the First National Bank offers a 5 percent nominal interest rate that is compounded monthly. Savings accounts at the Second National Bank have the same effective annual return, but interest is compounded quarterly. What nominal rate does the Second National Bank offer on its savings accounts? a. 5.12% b. 5.00% c. 5.02% d. 1.28% e. 5.22%
Required: A bank sells a "three against six" $3,000,000 FRA for a three-month period beginning three months from today and ending six months from today. The purpose of the FRA is to cover the interest rate risk caused by the maturity mismatch from having made a three-month Eurodollar loan and having accepted a six-month Eurodollar deposit. The agreement rate with the buyer is 5.57 percent. There are actually 92 days in the three-month FRA period. Assume that three months from today the settlement rate is 4.910 percent. Determine how much the FRA is worth and who pays who-the buyer pays the seller, or the seller pays the buyer. Note: Round your intermediate calculations to 6 decimal places. Round your answer to 2 decimal places. Assume 360 days in a year. the absolute value of the FRA
= A bank features a savings account that has an annual percentage rate of r interest compounded quarterly. Tatiana deposits $9,000 into the account. The account balance can be modeled by the exponential formula A(t) = a (1 + 7-)kt, where A is account value after t years, a is the principal (starting amount), r is the annual percentage rate, k is the number of times each year that the interest is compounded. (A) What values should be used for a, r, and k? a = r = 5.6% with k = (B) How much money will Tatiana have in the account in 7 years? Answer = $ 7. Round answer to the nearest penny. APY = = %. Round answer to 3 decimal places. (C) What is the annual percentage yield (APY) for the savings account? (The APY is the actual or effective annual percentage rate which includes all compounding in the year).
Reya placed Php 18,000 in a 240 day term deposit earning 8.5% per annum. How much will the bank pay Reya on the maturity date?A. 18,920B. 19,530C. 19,200
A firm borrows $200,000 at 10 percent from a bank with a compensating balance of 20 percent. What is the effective rate of interest if the loan is discounted and the principal is repaid at the end of one year? 15.28% 16.28% 17.28% 14.28% 19.55%
A loan of $34, 200.00 at 5.50% compounded semi - annually is to be repaid with payments at the end of every 6 months. The loan was settled in 5 years. a. Calculate the size of the periodic payment. $3, 645.25 $4,537.24 $ 3,958.30 $4,341.38 b. Calculate the total interest paid. $5, 383.00 $39,583.00 $1,424.70 $9,341.30

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