< Question Set 4 >Over the past 10 years, a bank has experienced the following loan losses on its C&I loans, consumerloans, and total loan portfolio.Year2018201720162015201420132012201120102009C&I Loans0.00800.00880.01000.01200.01040.00840.00720.00800.00960.0144Consumer Loans0.01650.0183Commercial Sector = 8.0% ; Consumer Sector = 18.0%Commercial Sector = 18.3%; Consumer Sector 8.2%0.02100.0255Commercial Sector = 8.2%; Consumer Sector 18.3%0.02190.01740.0147Using regression analysis on these historical loan losses, the bank has estimated the following:Xc= 0.002+0.8X₁ and X = 0.003 + 1.8X, where Xc = loss rate in the commercial sector, X₁, = loss rate in the consumer (household) sector,and X₁ loss rate for its total loan portfolio.O Commercial Sector = 18.0%; Consumer Sector = 8.0%0.01650.02010.0309(1) If the bank's total loan loss rates increase to 10 percent, what are the expected loss rate increasesin the commercial and consumer sectors?Total Loans0.00750.00850.01000.01250.01050.00800.00650.00750.00950.0155 < Question Set 4 >Over the past 10 years, a bank has experienced the following loan losses on its C&I loans, consumerloans, and total loan portfolio.Year2018201720162015201420132012201120102009C&I Loans0.00800.00880.01000.01200.01040.00840.00720.00800.00960.0144Consumer Loans0.01650.0183Commercial Sector = 8.0% ; Consumer Sector = 18.0%Commercial Sector = 18.3%; Consumer Sector 8.2%0.02100.0255Commercial Sector = 8.2%; Consumer Sector 18.3%0.02190.01740.0147Using regression analysis on these historical loan losses, the bank has estimated the following:Xc= 0.002+0.8X₁ and X = 0.003 + 1.8X, where Xc = loss rate in the commercial sector, X₁, = loss rate in the consumer (household) sector,and X₁ loss rate for its total loan portfolio.O Commercial Sector = 18.0%; Consumer Sector = 8.0%0.01650.02010.0309(1) If the bank's total loan loss rates increase to 10 percent, what are the expected loss rate increasesin the commercial and consumer sectors?Total Loans0.00750.00850.01000.01250.01050.00800.00650.00750.00950.0155

Given:For Commercial sector:XC= 0.002 + 0.8 XLSo,If XL increases by 10%, XC increases by = 0.8 X…

Answered: Year 2018 2017 2016 2015 2014 2013 2012…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Information concerning the allocation of loan portfolios to different market sectors is given below: Allocation of Loan Portfolios in Different Sectors (%) Sectors National Bank A Bank B Commercial 30% 50% 10% Consumer 40% 30% 40% Real Estate 30% 20% 50% Question: What’s the portfolio deviation from the national average for Bank A and Bank B, respectively?
According to the waterfall principle of securitization Question 7Answera.... investors with lower seniority should receive all their cash flows before the ones with the higher seniority receive their cash flows. b.... investors with higher seniority are more likely to be paid later than the ones with lower seniority. c....during the Credit Crisis of 2008/9, assets were over-rated by the credit rating agencies, in particular the more senior tranches. d....the mezzanine tranches of ABSS tended to be the largest ones of these securitized assets.
Which of the following was NOT a direct and major consequence of the 2007-2009 U.S. Subprime Financial Crisis? a. Small consumer and household savers lost all their money they had in savings accounts due to the failure of many smaller FDIC member banks b. Many people lost their homes when they could no longer make their payments after their subprime mortgage rates reset to a much higher rate after two years c. Lehman suffered a major financial collapse and ultimately was dissolved after many of its remaining parts were purchased by Barclays and Nomura, among others d. The U.S. stock markets dropped dramatically as the credit fueled economy of the mid-2000s started to suffer after the credit bubble began to burst.
Which interest rate is used on very short-term loans from one bank to another? A. Prime interest rate B. Commercial paper rate C. Treasury bill rate D. Fed funds rate
The zero-lower-bound problem: A. creates a negative shock to the economy. B. occurs because people can always earn more from holding bonds than holding cash... C. is responsible for the recession of 2007-2009. OD. implies that nominal interest rates can be zero.
2) Which of the following statements is INCORRECT based on the time value of money? A) In general, money today is worth more than money in one year. B) We define the risk-free interest rate (rf) for a given period as the interest rate at which money can be borrowed or lent without risk over that period. C) We refer to (1-r) as the interest rate factor for risk-free cash flows. D) For most financial decisions, costs and benefits occur at different points in time.
Discuss how the subprime mortgage crisis of 2007 was based upon the flawed financial model that house prices only increase.
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When firms enter into loan agreements with their bank, it is very common for the agreement to have a restriction on the minimum current ratio the firm has to maintain. So, it is important that the firm be aware of the effects of their decisions on the current ratio. Consider the situation of Advanced Autoparts (AAP) in 2009. The firm had total current assets of $1,907,570,000 and current liabilities of $1,362,550,000. a. What is the firm's current ratio? b. If the firm were to expand its investment in inventory and finance the expansion by increasing accounts payable, how much could it increase its inventory without reducing the current ratio below 1.2? c. If the company needed to raise its current ratio to 1.5 by reducing its investment in current assets and simultaneously reducing accounts payable and short-term debt, how much would it have to reduce current assets to accomplish this goal? Question content area bottom Part 1 a. What is the firm's…
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Qw.02. Compute trend percents for the following accounts using 2020 as the base year. For each of the three accounts, state whether the situation as revealed by the trend percents appears to be favourable or unfavourable Sales Cost of goods sold Accounts receivable Numerator: 2024: 2023: Numerator: 2024 $ 463,414 234,107 22,522 2024: 2023: 2022: 2021: 2020: Is the trend percent for Net Sales favourable or unfavourable? Numerator: I 1 1 1 Trend Percent for Net Sales: 2023 $ 306,897 155,099 17,861 1 1 1 I 1 2022 2021 $ 249,510 $ 175,095 128,255 89,348 10,226 17,042 Trend Percent for Cost of Goods Sold: Denominator: 2024: 2023: 2022: 2021: 2020: Is the trend percent for Cost of Goods Sold favourable or unfavourable? 7 Denominator: 7 1 Trend Percent for Accounts Receivable: Denominator: 2022: 2021: 2020: Is the trend percent for Accounts Receivable favourable or unfavourable? = E # = S U = E = = 2020 $ 129,700 64,850 8,871 Trend percent Trend percent Trend percent 1% %6 % % % % 196 196 56…
Suppose that the assets of a bank consist of $100 million of loans of BBB-rated corporations. The PD for the corporations is estimated as 1%. The average maturity is five years and the LGD is 60%. What is the total risk-weighted assets for credit risk under the Basel II advanced IRB approach? Question 5Answer a. $178.1 million b. $13.2 million c. $165.4 million d. $100 million

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