This case discusses the circumstances that have to be encountered by a mortgage business broker. Person JC is a new mortgage business broker and her cousin MK has approached to have a mortgage for a house that is being built. The house construction has to be completed in three months and he needs the mortgage at the completion stage of the house. The requirement of person MK is 25-year, $400,000 fixed-rate mortgage to be repaid on a monthly basis. Person JC has agreed to lend the money at the present market rate of 6%. Due to having insufficient fund with person JC, he has approached person IT, the president of IT Insurance Corporation for purchasing mortgage. Person IT has agreed the demand of person JC except on the price of the mortgage because he is unwilling to set a price on the mortgage loan, but rather he does agree in writing to purchase the mortgage at the market rate in three months. Moreover, the market has Treasury bond futures contract with a face value of $100,000 per contract at a maturity of three months. Characters in the case: Person JC: Owner of the mortgage business Person MK: Customer of JC Person IT: President of IT Insurance Corporation Company IT: An insurance corporation To determine: Mortgage amount to be paid by person IT if the interest rate rises to 7%.

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Answer 1

Question

Chapter 23, Problem 4M

a)

Summary Introduction

Case summary:

This case discusses the circumstances that have to be encountered by a mortgage business broker. Person JC is a new mortgage business broker and her cousin MK has approached to have a mortgage for a house that is being built. The house construction has to be completed in three months and he needs the mortgage at the completion stage of the house. The requirement of person MK is 25-year, $400,000 fixed-rate mortgage to be repaid on a monthly basis.

Person JC has agreed to lend the money at the present market rate of 6%. Due to having insufficient fund with person JC, he has approached person IT, the president of IT Insurance Corporation for purchasing mortgage. Person IT has agreed the demand of person JC except on the price of the mortgage because he is unwilling to set a price on the mortgage loan, but rather he does agree in writing to purchase the mortgage at the market rate in three months. Moreover, the market has Treasury bond futures contract with a face value of $100,000 per contract at a maturity of three months.

Characters in the case:

Person JC: Owner of the mortgage business

Person MK: Customer of JC

Person IT: President of IT Insurance Corporation

Company IT: An insurance corporation

To determine: Mortgage amount to be paid by person IT if the interest rate rises to 7%.

b)

Summary Introduction

To discuss: Effect of interest rate rise over the value of Treasury bond futures.

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Citibank is a US Bank which lost US$500 million due to human error in August 2020. Read the case noted in the link below, and answer the following questions: https://finopsinfo.com/investors/citis-900m-blunder-casts-light-on-poor-loan-ops/ Develop a risk management programme appropriate for this case (use attached template) Explain how compliance to this risk management programme can prevent the operation risk issue experienced by Citibank. Discuss the importance of an internal risk assessment and auditing process in relation to this case Step 1 Risks Brief description & how it relates to the case Step 2 List of possible risks Likelihood/Probability of occurrenceH/M/L or Nil Impact (if occurred)H/M/L or Nil What is being done about it now What more can be done about it Dept. where risk exposure exists Step 3 Risk identified Impact (if occurred)H/M/L Probability of occurrenceH/M/L Dept. where risk…

Citibank is a US Bank which lost US$500 million due to human error in August 2020. Read the case noted in the link below, and answer the following questions: https://finopsinfo.com/investors/citis-900m-blunder-casts-light-on-poor-loan-ops/ Develop a risk management programme appropriate for this case (use attached template) Explain how compliance to this risk management programme can prevent the operation risk issue experienced by Citibank. Discuss the importance of an internal risk assessment and auditing process in relation to this case Step 1 Risks Brief description & how it relates to the case Step 2 List of possible risks Likelihood/Probability of occurrenceH/M/L or Nil Impact (if occurred)H/M/L or Nil What is being done about it now What more can be done about it Dept. where risk exposure exists Step 3 Risk identified Impact (if occurred)H/M/L…

Citibank is a US Bank which lost US$500 million due to human error in August 2020. Read the case noted in the link below, and answer the following questions: https://finopsinfo.com/investors/citis-900m-blunder-casts-light-on-poor-loan-ops/ Develop a risk management programme appropriate for this case (use attached template) Explain how compliance to this risk management programme can prevent the operation risk issue experienced by Citibank. Discuss the importance of an internal risk assessment and auditing process in relation to this case

Answer 2

Question

Chapter 23, Problem 4M

a)

Summary Introduction

Case summary:

This case discusses the circumstances that have to be encountered by a mortgage business broker. Person JC is a new mortgage business broker and her cousin MK has approached to have a mortgage for a house that is being built. The house construction has to be completed in three months and he needs the mortgage at the completion stage of the house. The requirement of person MK is 25-year, $400,000 fixed-rate mortgage to be repaid on a monthly basis.

Person JC has agreed to lend the money at the present market rate of 6%. Due to having insufficient fund with person JC, he has approached person IT, the president of IT Insurance Corporation for purchasing mortgage. Person IT has agreed the demand of person JC except on the price of the mortgage because he is unwilling to set a price on the mortgage loan, but rather he does agree in writing to purchase the mortgage at the market rate in three months. Moreover, the market has Treasury bond futures contract with a face value of $100,000 per contract at a maturity of three months.

Characters in the case:

Person JC: Owner of the mortgage business

Person MK: Customer of JC

Person IT: President of IT Insurance Corporation

Company IT: An insurance corporation

To determine: Mortgage amount to be paid by person IT if the interest rate rises to 7%.

b)

Summary Introduction

To discuss: Effect of interest rate rise over the value of Treasury bond futures.

Expert Solution & Answer

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Answer 3

Question

Chapter 23, Problem 4M

a)

Summary Introduction

Case summary:

This case discusses the circumstances that have to be encountered by a mortgage business broker. Person JC is a new mortgage business broker and her cousin MK has approached to have a mortgage for a house that is being built. The house construction has to be completed in three months and he needs the mortgage at the completion stage of the house. The requirement of person MK is 25-year, $400,000 fixed-rate mortgage to be repaid on a monthly basis.

Person JC has agreed to lend the money at the present market rate of 6%. Due to having insufficient fund with person JC, he has approached person IT, the president of IT Insurance Corporation for purchasing mortgage. Person IT has agreed the demand of person JC except on the price of the mortgage because he is unwilling to set a price on the mortgage loan, but rather he does agree in writing to purchase the mortgage at the market rate in three months. Moreover, the market has Treasury bond futures contract with a face value of $100,000 per contract at a maturity of three months.

Characters in the case:

Person JC: Owner of the mortgage business

Person MK: Customer of JC

Person IT: President of IT Insurance Corporation

Company IT: An insurance corporation

To determine: Mortgage amount to be paid by person IT if the interest rate rises to 7%.

b)

Summary Introduction

To discuss: Effect of interest rate rise over the value of Treasury bond futures.

Expert Solution & Answer

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Answer 4

Question

Chapter 23, Problem 4M

a)

Summary Introduction

Case summary:

This case discusses the circumstances that have to be encountered by a mortgage business broker. Person JC is a new mortgage business broker and her cousin MK has approached to have a mortgage for a house that is being built. The house construction has to be completed in three months and he needs the mortgage at the completion stage of the house. The requirement of person MK is 25-year, $400,000 fixed-rate mortgage to be repaid on a monthly basis.

Person JC has agreed to lend the money at the present market rate of 6%. Due to having insufficient fund with person JC, he has approached person IT, the president of IT Insurance Corporation for purchasing mortgage. Person IT has agreed the demand of person JC except on the price of the mortgage because he is unwilling to set a price on the mortgage loan, but rather he does agree in writing to purchase the mortgage at the market rate in three months. Moreover, the market has Treasury bond futures contract with a face value of $100,000 per contract at a maturity of three months.

Characters in the case:

Person JC: Owner of the mortgage business

Person MK: Customer of JC

Person IT: President of IT Insurance Corporation

Company IT: An insurance corporation

To determine: Mortgage amount to be paid by person IT if the interest rate rises to 7%.

b)

Summary Introduction

To discuss: Effect of interest rate rise over the value of Treasury bond futures.

Expert Solution & Answer

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Answer 5

Chapter 23, Problem 4M

a)

Summary Introduction

Case summary:

This case discusses the circumstances that have to be encountered by a mortgage business broker. Person JC is a new mortgage business broker and her cousin MK has approached to have a mortgage for a house that is being built. The house construction has to be completed in three months and he needs the mortgage at the completion stage of the house. The requirement of person MK is 25-year, $400,000 fixed-rate mortgage to be repaid on a monthly basis.

Person JC has agreed to lend the money at the present market rate of 6%. Due to having insufficient fund with person JC, he has approached person IT, the president of IT Insurance Corporation for purchasing mortgage. Person IT has agreed the demand of person JC except on the price of the mortgage because he is unwilling to set a price on the mortgage loan, but rather he does agree in writing to purchase the mortgage at the market rate in three months. Moreover, the market has Treasury bond futures contract with a face value of $100,000 per contract at a maturity of three months.

Characters in the case:

Person JC: Owner of the mortgage business

Person MK: Customer of JC

Person IT: President of IT Insurance Corporation

Company IT: An insurance corporation

To determine: Mortgage amount to be paid by person IT if the interest rate rises to 7%.

b)

Summary Introduction

To discuss: Effect of interest rate rise over the value of Treasury bond futures.

Answer 6

Chapter 23, Problem 4M

a)

Summary Introduction

Case summary:

This case discusses the circumstances that have to be encountered by a mortgage business broker. Person JC is a new mortgage business broker and her cousin MK has approached to have a mortgage for a house that is being built. The house construction has to be completed in three months and he needs the mortgage at the completion stage of the house. The requirement of person MK is 25-year, $400,000 fixed-rate mortgage to be repaid on a monthly basis.

Person JC has agreed to lend the money at the present market rate of 6%. Due to having insufficient fund with person JC, he has approached person IT, the president of IT Insurance Corporation for purchasing mortgage. Person IT has agreed the demand of person JC except on the price of the mortgage because he is unwilling to set a price on the mortgage loan, but rather he does agree in writing to purchase the mortgage at the market rate in three months. Moreover, the market has Treasury bond futures contract with a face value of $100,000 per contract at a maturity of three months.

Characters in the case:

Person JC: Owner of the mortgage business

Person MK: Customer of JC

Person IT: President of IT Insurance Corporation

Company IT: An insurance corporation

To determine: Mortgage amount to be paid by person IT if the interest rate rises to 7%.

Answer 7

Chapter 23, Problem 4M

a)

Summary Introduction

Case summary:

This case discusses the circumstances that have to be encountered by a mortgage business broker. Person JC is a new mortgage business broker and her cousin MK has approached to have a mortgage for a house that is being built. The house construction has to be completed in three months and he needs the mortgage at the completion stage of the house. The requirement of person MK is 25-year, $400,000 fixed-rate mortgage to be repaid on a monthly basis.

Person JC has agreed to lend the money at the present market rate of 6%. Due to having insufficient fund with person JC, he has approached person IT, the president of IT Insurance Corporation for purchasing mortgage. Person IT has agreed the demand of person JC except on the price of the mortgage because he is unwilling to set a price on the mortgage loan, but rather he does agree in writing to purchase the mortgage at the market rate in three months. Moreover, the market has Treasury bond futures contract with a face value of $100,000 per contract at a maturity of three months.

Characters in the case:

Person JC: Owner of the mortgage business

Person MK: Customer of JC

Person IT: President of IT Insurance Corporation

Company IT: An insurance corporation

To determine: Mortgage amount to be paid by person IT if the interest rate rises to 7%.

Answer 8

b)

Summary Introduction

To discuss: Effect of interest rate rise over the value of Treasury bond futures.

Answer 9

b)

Summary Introduction

To discuss: Effect of interest rate rise over the value of Treasury bond futures.

Answer 10

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Answer 11

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Answer 13

Ch. 23.1 - Prob. 23.1ACQ Ch. 23.1 - Prob. 23.1BCQ Ch. 23.2 - Prob. 23.2ACQ Ch. 23.2 - Prob. 23.2BCQ Ch. 23.3 - What is a forward contract? Describe the payoff...Ch. 23.3 - Prob. 23.3BCQ Ch. 23.4 - Prob. 23.4ACQ Ch. 23.4 - Prob. 23.4BCQ Ch. 23.5 - Prob. 23.5ACQ Ch. 23.5 - Prob. 23.5BCQ

Solution Summary: The author explains how a mortgage business broker, JC, approached the president of IT Insurance Corporation, who agreed to pay the mortgage amount if the interest rate rose to 7%.

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To discuss: Effect of interest rate rise over the value of Treasury bond futures.

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