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Exam

Name___________________________________

MULTIPLE CHOICE.  Choose the one choice that best completes the announcement or answers the topic.

1)  The ask-for for an asset agitates if ________ descends. 1)

A)  betray assignring-to to other possessions              B) mammon C) expected repay assignring-to to other possessions D) flowingity assignring-to to other possessions

2)  Banks' attempts to work-out irrelevant choice and virtuous scaptivate sums aid clear-up hypothecation 2) administration principles such as A) confidence aspectning.

B)   collateral and indemnifying adjusts.

C)   screening and mentoring of hypothecation applicants.

D)  all of the aggravatehead.

E)   merely A and B of the aggravatehead.

3)  When a hypothecatione refuses to gain a hypothecation, although borrowers are inclined to pay the ordinary producer rebuke             3) or flush a loftier rebuke, it is said to enlist in ________.

A)  confidence aspectning B) harsh lending C) strategic frown D) collusive manner

4)  If a bank has aggravate rebuke- sensitive liabilities than rebuke- sensitive possessions, then a(n) ________ in producer 4) rebukes get ________ bank pay.

A)  increase; growth               B) growth; subjugate

                         C) disengage; not affect                                                            D) disengage; subjugate

First National Bank

 

   Assets                  Liabilities

Rate-sensitive Fixed-rate

$20 darling         $50 darling

$80 darling         $40 darling

Table 23.1

5)  Referring to Table 23.1, if producer rebukes agitate by 5 percentage points, then bank pay (measured     5) using gap decomposition) get

A)  growth by $1.5 darling.  B) disundertake by $0.5 darling.

                         C) disundertake by $2.5 darling.                                                 D) disundertake by $1.5 darling.

First National Bank

 

   Assets                  Liabilities

Rate-sensitive Fixed-rate

$40 darling         $50 darling

$60 darling         $40 darling

Table 23.2

6) Assign to Table 23.2. Pretentious that the middle prolongation of the bank's possessions is lewd years, occasion the middle prolongation of its liabilities is three years, a agitate in producer rebukes from 5 percent to 10 percent get producer the net objurgate of First National to ________ by ________ of the whole peculiar asset objurgate.

          A) disengage; 6.2%                   B) growth; 5%                    C) disengage; 5%                      D) disengage; 1.3%

6)

7)  Measuring the sensitivity of bank pay to displaces in producer rebukes by multiplying the gap for      7) distinct manliness subintervals by the displace in the producer rebuke is denominated A) basic gap decomposition.

B)   the manliness bucket advent to gap decomposition.

C)   the segmented manliness advent to producer- exposure decomposition.

D)  the segmented manliness advent to gap decomposition.

E)   none of the aggravatehead.

8)  If a disundertake in producer rebukes producers the negotiate objurgate of a bank's net objurgate to agitate, then the bank       8) must keep a ________.

                         A) direct prolongation gap                                                     B) direct gap

    
  
 
 


                         C) privative prolongation gap                                                    D) privative gap

B)   does not estimate the sensitivity of net objurgate to producer rebuke displaces.

C)   does not estimate the sensitivity of pay to producer rebuke displaces.

D)  is conducive pretentious that the acquiesce flexion is mawkish.

E)   is conducive pretentious that the acquiesce flexion does not displace.

10)  One sum delay basic gap decomposition is that it

A)  is conducive pretentious producer rebukes on all maturities are resembling.

B)   does not estimate the sensitivity of pay to producer rebuke displaces.

C)   is conducive pretentious producer rebukes on all maturities displace by resembling sums.

D)  applies merely to financial literatures.

E)   measures the sensitivity of net objurgate to producer rebuke displaces.

11)  A bank director restless encircling producer pay who expects producer rebukes to descend and who knows              11) the bank currently has a direct gap should ________ rebuke- sensitive possessions and ________ rebuke- sensitive liabilities.

A)  decrease; wane              B) wane; growth

                         C) growth; growth                                                            D) growth; wane

12)  The reckon of abbreviates unappropriated in a detail financial coming is the ________.          12)

A)  open producer        B) unappropriated adjust

                         C) renunciation plane                                                                         D) ask-for coefficient

13) The utility of obtrusive abbreviates aggravate comings abbreviates is that obtrusive abbreviates

            A) keep inferior want betray.                                                 B) are standardized.

            C) are aggravate flowing.                                                                D) are none of the aggravatehead.

13)

14)  When a financial literature hedges the producer- rebuke betray for a unfair asset, the hedge is denominated a 14) ________.

A)  macro hedge     B) comings hedge C) micro hedge   D) perverse hedge

15)  An growth in the vaporousness of the beneathlying asset, all other things held agricultural, get ________ the 15) non-interference bounty.

A)  not affect             B) growth C) wane D) Not sufficient counsel is attached.

16)  A financial abbreviate that obligates one laterality to exdisplace a set of payments it owns for another set of             16) payments owned by another laterality is denominated a ________.

A)  perverse put non-interference               B) swap

                         C) perverse wheedle non-interference                                                               D) perverse hedge

17)  If Second National Bank has aggravate rebuke- sensitive possessions than rebuke- sensitive liabilities, it can subjugate                17) producer- rebuke betray delay a swap which requires Second National to A) captivate a agricultural rebuke occasion paying a unordered rebuke.

B)   twain captivate and pay a unordered rebuke.

C)   twain captivate and pay a agricultural rebuke.

D)  pay a agricultural rebuke occasion receiving a unordered rebuke.

18)  The use of financial derivatives by financial literatures to hedge can wane betray. However, they 18) can too growth betray. Which of the forthcoming samples illustrates this?

A)  Some literatures such gigantic sums of derivatives that the sums surpass chief.

B)   Financial derivatives yield financial literatures to growth their leverage.

C)   All of the aggravatehead are sufficient samples.

D)  None of the aggravatehead are sufficient samples.

19)  Factors that producer the ask-for flexion for obligations to displace to the left include   19)

A)  an growth in the flowingity of funds.

B)   an growth in the inflation rebuke.

C)   a wane in the vaporousness of fund estimates.

D)  all of the aggravatehead.

E)   none of the aggravatehead.

20)  According to the expectations hypothesis of the message organization,              20)

A)  buyers of obligations promote short- message to long- message obligations.

B)   producer rebukes on obligations of incongruous maturities instigate coincidently aggravate spell.

C)   the producer rebuke on long- message obligations get surpass the middle of expected coming short- message producer rebukes.

D)  all of the aggravatehead.

E)  

 
 


merely A and B of the aggravatehead.

21) If bad confidence betrays are the ones who most actively follow hypothecations and, for-this-reason, captivate them from financial intermediaries, then financial intermediaries aspect the sum of

            A) irrelevant choice.                                                             B) rich set-forth genuineness.

             C) liberal- riding.                                                                       D) virtuous stake.

21)

22)  The sum created by asymmetric counsel precedently the action occurs is denominated ________,             22) occasion the sum created behind the action occurs is denominated ________.

A)  free- riding; rich set-forth genuineness           B) irrelevant choice; virtuous stake

            C) virtuous stake; irrelevant choice                                 D) rich set-forth genuineness; liberal- riding

23)  The manner of deleveraging assigns to

A)  a contraction in score proportioned by banks.

B)   cutbacks in lending by financial literatures.

C)   twain A and B.

D)  none of the aggravatehead.

24)  When we assign to the phantom banking order, what are we talking encircling?           24)

A)  the subsidiaries of warrantyory literatures

B)   the "underground" banking order used for illicit activities

C)   hedge funds, investment banks, and other nonbank financial firms that yield flowingity

D)  none of the aggravatehead

25)  Federal Retention anarchy is provision to

A)  introduce longer- run considerations to monetary devicemaking.

B)   introduce a short- message prepossession to monetary devicemaking.

C)   control to reform fiscal and monetary device coordination.

D)  do twain A and B of the aggravatehead.

26)  The hypothesis of bureaucratic manner suggests that the external of a bureaucracy is to maximize 26) A) its own thrift.

B)   the public's thrift.

C)   profits.

D)  conflict among the supporter and legislative branches of parliament.

27)  Instrument anarchy resources the mediate bank is liberal from  27)

A)  political constraining respecting the goals it pursues.

B)   political constraining respecting how it uses the tools of monetary device.

C)   twain A and B of the aggravatehead.

D)  neither A nor B of the aggravatehead.

A)  the estimate the Fed pays for parliament securities.

B)   the producer rebuke on hypothecations of retentions from one bank to another.

C)   the estimate banks pay the Fed for parliament securities.

D)  the producer rebuke on hypothecations from a bank to the federal parliament.

E)   the producer rebuke on hypothecations from the Fed to a bank.

29) Which of the forthcoming announcements is gentleman?

A)                       Bubbles driven solely by beastly profusion control to a need of financial literatures.

B)                        Credit- driven asset bubbles are detailly exposed. When asset estimates descend, the deleveraging of confidence negotiates subjugates economic disposition. C) Twain A and B are rectify.

D) Neither A nor B is rectify.

29)

30)  Bankers' moment respecting the optimal mix of abundance retentions, inferior retentions, borrowings  30) from the Fed, and borrowings from other banks to negotiate delay warranty outflows is an sample of

A)  managing producer- rebuke betray.        B) flowingity administration.

            C) impost administration.                                                    D) none of the aggravatehead.

31)  Holding everything else agricultural, if the federal funds rebuke agitates, then the ask-for for       31) A) retentions get not displace beproducer the Fed sets the plane of required retentions.

B)   required retentions agitates beproducer the require of borrowing from the Fed is assignring-toly inferior.

C)   abundance retentions agitates beproducer they keep a loftier repay.

D)  required retentions descends beproducer the require of borrowing from the Fed is assignring-toly loftier.

E)   abundance retentions descends beproducer they keep a loftier require.

32)  If a bank has $100,000 of warrantys, a required retention aspect of 20 percent, and $40,000 in retentions,                32) then the acme warranty outflow it can support delayout altering its adproportioned prevarication is

A)  $25,000.              B) $10,000.           C) $30,000.           D) $20,000.

33)  A bank can subjugate its whole sum of hypothecations unappropriated by       33)

A)  "calling in" hypothecations; that is, by not renewing some hypothecations when they follow due.

B)   selling hypothecations to other banks.

C)  

 
 


selling hypothecations to the Federal Reserve.

D)  doing all of the aggravatehead.

E)   doing merely A and B of the aggravatehead.

A)  encourages bank directors to captivate on senior betrays than they inadequately would.

B)   attracts betray- prone entrepreneurs to the banking perseverance.

C)   reduces the incentives of warrantyors to mentor the betrayiness of their banks' asset portfolios.

D)  does all of the aggravatehead.

E)   does merely A and B of the aggravatehead.

35)  The pristine variety among the "payoff" and the "purchase and assumption" rules of      35) handling failed banks is that the FDIC

A)  guarantees all warrantys, not proportioned those beneath the $250,000 boundary, when it uses the "payoff" rule.

B)   is aggravate mitigated to use the "payoff" rule when the bank is vast and it fears that warrantyor losses may instigate office bankruptcies and other bank needs.

C)   guarantees all warrantys, not proportioned those beneath the $250,000 boundary, when it uses the "purchase and assumption" rule.

D)  does twain A and B of the aggravatehead.

E)   does twain B and C of the aggravatehead.

36)  The parliament that disjoined marketable banking from the securities perseverance is notorious as the 36) ________.

A)  Glass- Steagall Act B) McFadden Act C) National Bank Act D) Federal Retention Act

A)  subjugate financial literatures' producer- rebuke betray.

B)   benefit homeowners when producer rebukes are descending.

C)   subjugate households' betray of having to pay loftier hypothecation payments when producer rebukes agitate.

D)  do merely A and B of the aggravatehead.

38)  The bundling of hypothecations into a saleable certainty (usually for vast literatureal investors) is 38) denominated ________.

A)  hedge non-interferenceing

B)   disintermediation

C)   securitization

D)  quasi- intermediation E) comings bundling

39)  When disintermediation occurs, the banking order ________ warrantys and bank lending ________.       39)

A)  loses; growths B) gains; growths

            C) loses; wanes                                                                D) gains; wanes

40)  In a ________ banking order, marketable banks enlist in securities beneathwriting, but separate             40) subsidiaries induce the incongruous activities. Also, banking and prophylactic are not typically beneathtaken coincidently in this order.

A)  universal B) divided

C)   British- style universal

D)  compartmentalized

E)   severable

 

Amounts are in darlings

 

Assets

 

Duration

Reserves and Cash Items

 $          6 

0

Securities

 

 

 < 1 year

 $          5 

0.75

 1 to 2 years

 $          5 

1.5

 > 2 years

 $        10 

5

Residential Mortgages

 

 

 Variable Rate

 $          8 

0.5

 Fixed Rate

 $        10 

8

Commercial Loans

 

 

 < 1 year

 $        15 

0.5

 1 to 2 years

 $        13 

1.3

 > 2 years

 $        25 

8

Physical Capital

 $          3 

0

 

 

 

Total Assets

 $      100 

 

 

 

Liabilities

 

Duration

Checkable Deposits

15

2

Money Negotiate Accounts

8

0.1

Savings Deposits

10

1

Certificates of Deposits

 

 

 Variable Rate

5

0.5

 < 1 year

15

0.5

 1­2 years

10

1.5

 > 2 years

5

4

Fed Funds

7

0

Borrowings

 

 

 < 1 year

10

0.5

 1­2 years

5

1.5

 > 2 years

5

3

 

 

 

Equity

5

 

 

 

 

Liabilities + Equity

100

 

                 

15 pts

1.) What is the collision to this year’s net pay if producer rebukes growth from 5% to 6%?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5 pts

2.) What is the collision to equity if producer rebukes growth from 5% to 6%?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Extra Credit:

 

“This parrot is _________________________________________________________” Extra Confidence (10 pts)

A semiannual obligation delay 4 years to manliness has a coupon rebuke of 5%. The aspect objurgate of the obligation is $1,000 and trades at $1,074.86. Calculate Macaulay prolongation, qualified prolongation, and efficacious prolongation for this obligation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Using the counsel from the preceding topic, how ample would the obligationholder gain/lose if producer rebukes waned by 50 bps?