Why would a bank sell a package (portion) of its loans? A) to decrease liquidity B) to increase the size of its loan portfolio to increase current earnings by selling loans whose book value exceed their market value D) all of the above E) none of the above
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- 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 exposureo what is 2) Why is bout 3) What а loan? discounting? / Why rate than the the required different are the benefits de people discount? of return On a Coupon rate ? to the bank of amortizingWhich 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
- Give typing answer with explanation and conclusion Q. 23 Why do commercial banks focus on relatively short-term loans? - b/ short term loans allow rapid turnover of cash flows - a/ short-term loans are safer - a,b, and c - c/ these banks need to coordinate their portfolio with changes in economic conditions and the level of interest rates - b and cWhich of the following is generally the least expensive source of funding? A) demand deposits B) savings deposits C) time deposits D) purchased liabilitiesQUESTION 3 (a) Contrast between overnight policy rate and base lending rate. (b) “In order to enhance the liquidity of a bank, the bank can securitise its assets.”Elaborate the above statement with example.
- QUESTION 3 Which of the following actions cannot be used by banks to increase reserves? A. Buy Treasury debt B. Sell loans C. Call loans D. Sell Treasury debtQUESTION 1 : Protecting Interest Income/Revenue• From the banker’s point of view, when the banker quotes a floating interest, in doing so, the banker is passing on the interest rate risk to the borrower.• What if the banker has to quote a fixed interest rate but his cost of funds are floating?In this case, the customer/borrower faces no risk but the banker does.• Example: As a Credit Officer bank you have agreed to provide a customer with a fixedrate, 3-month, RM 20 million loan 90 days from today. You had priced the loan at 12%annual interest rate.• The following quotes are available in the market.3-month KLIBOR = 9 %3-month KLIBOR futures = 90.0 (matures in 90 days)How would you protect yourself from a rise interest rates?what would the new value for Loans be for Bank A? and investment, Cash and reserve,deposits, debt and equity?
- Question 1e A bank finds that its assets are not matched with its liabilities. It is taking floating-rate deposits and making fixed-rate loans. How can swaps be used to offset the risk?If a bank has a positive repricing gap (RSAs > RSLs), then: Does this bank have reinvestment or refinancing risk? If interest rates increase, net interest income will: A. Reinvestment risk, increase B. Reinvestment risk, decrease C. Refinancing risk, increase D. Refinancing risk, decrease4. Gap and Duration Analysis Take the following balance sheet, which of the assets and labilities are rate-sensitive? Which assets and liabilities are not? a. Assets Value Liabilities Value Checkable Deposits Savings Deposits Money Market Accounts 40 Long-Term Loans Long-Term Securities 75 26 100 Reserves 54 10 Variable Rate CDs 25 Short-Term Securities Variable-rate Loans 15 30 Long-Term CDs 25 b. What is the estimated rate of change of bank profit, in terms of next year's interest rate, conditional on this year's interest rate being 2%? c. Suppose that all the long-term securities that the bank holds mature in 4 years and their interest rate will be 5% in that year. What is the approximate market-value of these long-term securities in 4 years given this year's interest rate is 2%?
