The ABC Bank takes funds from depositors and gives out commercial, housing and car loans. Now, instead of keeping the housing and car loans on its books, it sells them to a hedge fund. However, the borrowers still make payments to ABC Bank which then remits the payments to the hedge fund. The bank receives a fee from the hedge fund for servicing the loans. Discuss two (2) advantages to ABC Bank from switching its housing and car loans business to the fee-based income model of banking instead of earning an interest spread (difference in interest between what the bank charges its customers and pays its depositors).

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A: Bank deposits consist of money placed into banking institutions for safekeeping. These deposits are…

Q: Which of the following would increase a bank’s Net Interest Margin, assuming all else stays the…

A:

Q: Bank Muscat advances secured and unsecured loans to their customers. If Bank Muscat is issuing…

A: Secured loans are the loans which provided to borrower after taking collateral security. Unsecured…

Q: 1.) A credit card is which of the following? All of the answers are correct Is one part of a…

A: Solution Note : As per the Q&A guideline we are required to answer the first question only .…

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A: Central bank or other monetary authority is charged with issuing domestic currency. That is an…

Q: A lending officer at C Bank has insisted that your firm improve the current ratio of 0.8 before the…

A: To improve the current ratio, either current assets should increase or current liabilities decrease.

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A: fed impact the flow of money through various method such as OMO, change in interest rate.

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A: A repurchase agreement with a central bank is an agreement where the central bank agrees to loan out…

Q: One example of financial intermediation is the selling of mortgages by banks to a third party. If…

A: Banks are an finacial intertmediary. the institution that operates between a depositor in a bank and…

Q: Imagine that you are in the position of buying loans in the secondary market (that is, buying the…

A: Banks generally prefer secondary markets for lending purposes so that they can always have the funds…

Q: hich of the following is not a way in which banks lend short-term unsecured loans? a. Through a…

A: Banks give short term credits to the business to increase the business and grow business and provide…

Q: Suppose a bank offered to make loans to potential borrowers without checking their credit history.…

A: The banks generate their income mainly from the difference between the lending rate and the rate…

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A: Note: According to the policy, we are supposed to provide the solution of one question at a time,…

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A: Discriminant analysis is the analysis which provide the permission to organization in determining…

Q: You will discuss credit from the lenders point of view. What factors do lenders consider when making…

A: A credit score is a numerical representation of a person's creditworthiness and indicates how well…

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A: Banks and Financial institutions make most of their money from loaning and re-loaning money. Low…

Q: In certain scenerios, some companies may choose to finance with a bank loan specifically because of…

A: Interest payment deduction can be claimed on borrowings while computing business income provided…

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Q: What are the advantages and disadvantages of direct lending for the bank? How are banks reducing the…

A: Direct lending refers to a type of lending that is provided directly by the lender, such as a bank,…

Q: If you make monthly payments of $527.00 into an ordinary annuity earning an annual have in the…

A: As there is more compounding the more interest is being accumulated and more is future value of…

Q: banks evaluate credit risk Your Bear Co. is a company that makes teddy bears. It applies for a loan…

A: Understanding the rationale behind these requirements is essential to grasp how banks evaluate…

Q: According to the FDIC, they would like to see fewer banks in the future. What will be the outcome…

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A: Companies often participate in repurchase agreements, or repos, primarily as borrowers. In these…

Q: What are the major flaws with NPV? What are the major flaws with IRR? If you are going to a bank and…

A: Major flaws with NPV:Requires an assumption of discount rate which is not directly observable in the…

Q: Our textbook claims that one of the key services banks provide is maturity intermediation: what…

A: The banks act as intermediaries between the people with the money and those that need money.…

Q: Which of the following are ways that commercial banks use the funds they receive? Check all that…

A: Solution- (1)-  The funds received by commercial banks are typically wont to lend and thereby earn…

Q: . Transferring the credit risk of loans from their balance sheet to other fin .Reducing due…

A: Loans after some time increase the risk and institutions giving loans become highly illiquid and…

Flow of Funds

The flow of funds is the financial accounts of the nation, which monitor and control the cash flow among various sectors or industries, or markets. Central banks use these flow of funds statements to acquire macroeconomic data, to publish cash inflow and cash outflow statements of the nation. This flow of funds system is utilized to identify economic activity and changes in the economy. It is used by Federal Reserve to determine the Gross Domestic Product (GDP) of the nation and to implement monetary policy and fiscal policies.