EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 3, Problem 13QTD
a)
Summary Introduction
To discuss: The reasons can person X will give for the bank to improve its
b)
Summary Introduction
To discuss: The impact of this performance by bank on value of its equity securities and value of its debt.
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If ABC Bank’s ALCO targets the market value of shareholders’ equity in its interest rate risk management, is the bank positioned to gain or lose if interest rates fall?b. If interest rates rise by 1% for all assets and liabilities, what is the approximate expected change in the bank’s economic value of equity?c. Provide a specific transaction that the bank could implement in order to immunize its interest rate risk exposure.
For a bank with deficient capital ratios, which of the following actions could be required by regulators to increase the capital ratios, all else constant? A. Reallocate assets to increase the bank's holdings of cash B. Increase the bank's leverage C. Increase the bank's growth rate by making additional commercial loans. D. Increase the bank's dividend payment E. Decrease the bank's holdings of short-term Treasury
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1. Suppose that a financial institution has a negative $25 million difference between its assets and liabilities. Is the institution exposed to refinancing risk or reinvestment risk and what will happen to net income if there is a rise in interest rates?
2. Suppose a financial institution has a positive $25 million difference between its assets and liabilities. Is the institution exposed to refinancing risk or reinvestment risk and what will happen to net income if there is a drop in interest rates?
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