Which one is not an incentive for a bank to securitize its mortgage loans? Reduce insurance premium paid to FDIC Meet the regulations on equity capital adequacy Increase the duration of the bank's asset portfolio Reduce the bank's illiquidity exposure hich one is not an incentive for a bank to Securitize its mortgage loans? A Reduce insurance premium paid to FDIC B Meet the regulations on equity capital adequacy Increase the duration of the bank's asset portfolio Reduce the bank's illiquidity exposure

Which one is not an incentive for a bank to securitize its mortgage loans? Reduce insurance premium paid to FDIC Meet the regulations on equity capital adequacy Increase the duration of the bank's asset portfolio Reduce the bank's illiquidity exposure hich one is not an incentive for a bank to Securitize its mortgage loans? A Reduce insurance premium paid to FDIC B Meet the regulations on equity capital adequacy Increase the duration of the bank's asset portfolio Reduce the bank's illiquidity exposure

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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QUESTION 9 The interest rate charged on secured short-term loans to a corporation is generally higher than that charged on unsecured short-term loans because ... the risk of default is lower on secured loans. secured loans are less risky than unsecured loans. it is costly to negotiate and administer secured loans. lenders of secured loans must pay more for their funds.
Why are the banks reluctant to lend, and what should be done to increase bank lending?
Securitization of loans (mortgages) does not bring any benefits to a Commercial Banks balance sheet. True False
A commercial bank in Barbados faces serious liquidity problems; however, they have an asset that has the required value to meet their debt obligations. However, due to poor economic conditions, they may not get a buyer in time to purchase such an asset at their preferred price, so they may end up losing money for selling that asset lower than their preferred price, or if they choose not to sell the asset, they will not be able to meet their financial obligation. Which of the following strategy is best suited to manage the bank’s liquidity risk? Select one: a. Interest rate swaps b. Stress Tests c. Diversifying d. Hedging
True or False: When a company borrows money to finance the purchase of an asset to use in its business, one of their likely goals is to earn a rate of return on that asset which is lower than the interest rate on the loan borrowing. Select one: True False
hich one is not an incentive for a bank to Securitize its mortgage loans? A) Reduce insurance premium paid to FDIC B Meet the regulations on equity capital adequacy Increase the duration of the bank's asset portfolio D Reduce the bank's illiquidity exposure
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Select all that are true regarding liquidity risk for a bank. Consumer trust in the bank ensures a flow of funds from customers, reducing this risk. O A reduced access to credit markets reduces the bank's liquidity risk. Higher liquidity risk is a result of lower borrowing costs to the bank. O The flow of funds form the bank's clearing of payments reduces this risk. | This risk creates an opportunity cost which could result in a hole in the risk management strategy of the bank. O An increase in the bank's credit rating will help to reduce their liquidity risk.
Banks may deny creditworthy borrowers loan requests if a. they are non-corporate entities b. they are on late on paying taxes c. the loan is too risky d. they are individuals
15) Different banks in a country offers high interest rate on Negotiable certificate of deposits. It a. Attracts banks to increase their deposit b. Banks will become insolvent c. Attracts banks to purchase more assets d. Attracts customers to increase their loan
As a bank manager, you conclude that the bank has a capital shortfall and should decrease the equity multiplier (i.e., increase the capital ratio) to prevent bank failure. Which of the following is one of things you can do to manage capital adequacy of the bank? a.Acquiring more reserves through borrowing from fed funds loansb.Selling the bank's holding of mortgage-backed securities and using the proceeds to decrease liabilitiesc.Repurchasing shares of the bankd.Increasing dividend payout ratio to reduce retained earnings.
Economic conditions in Fredland have caused the demand for money to increase which has changed the nominal interest rate. If the central bank wants to counteract this change, which of the following is an appropriate open market operation to achieve that? Select one: O a. Raise the discount rate. O b. Increase taxes. O c. Decrease the reserve requirement. O d. Sell bonds. O e. Buy bonds.

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