QUESTION THREE (3) Explain in detail each of the following primary risks faced by banks and explain how they are managed. A. Credit risk, B. Liquidity risk, C. Interest rate risk, and D. Foreign exchange risk
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QUESTION THREE (3)
Explain in detail each of the following primary risks faced by banks and explain how they
are managed.
A. Credit risk,
B. Liquidity risk,
C. Interest rate risk, and
D. Foreign exchange risk
Step by step
Solved in 3 steps
- QUESTION 8 Which is the riskier action for a bank? A. Making foreign exchange trades on behalf of customers B. Making foreign exchange trades with bank assetsApex Learning - Courses m/public/activity/5000001/assessment L Pretest: Unit 5 Question 4 of 20 Why do banks practice fractional reserve banking? A. It ensures that all customers can withdraw their funds at once. B. It allows them to lend more money than they hold in deposits. C. It increases the value of collateral used to secure mortgages. D. It encourages customers to accept higher interest rates on loans. SUBN PREVIOUS O O4. Which of the following is most likely a financial security? a. Foreign currency O b. Insurance plan c. Commodities d. Preferred share O e. None of the above
- a. Based on the functions of the banking system, give reasons why governments bail out banks during an economic crisis? b. Is the World heading for a recession? Explain the conditions under which the world can be classified as being in a recession as COVID-19 persists. Explain linking the pandemic to the various stages of a recession.Discuss the importance of Financial System. How do Financial Markets help the economy and how can it hurt the economy? Site an example. What are the different Financial Intermediaries and explain how they carry out the objectives of the financial system? Differentiate Direct Financing and Indirect Financing as illustrated in the figure 1 above. What are Financial Instruments? Give examples and explain each.DMacroeco X + A learn.vccs.edu/courses/362470/quizzes/2905964/take E Apps M Gmail YouTube Maps Get My Payment | . Question 13 Which of the following will yield to a bank the lowest return? O Short term loans with little risk. Long term loans with a lot of risk. There is no distinction in the types of loans and risk or potential return. Loans made where the liquidity rate is the highest. Question 14 2 pts The Federal Reserve has the duty of regulating the nation's money supply. True False Question 15 2 pts P Type here to search
- Financial intermediaries a.reduce the cost of financial transactions. b.provide safety of resources only for the large borrowing customers who can afford it. c.increase the cost of financial transactions but offset these higher costs by providing safekeeping of customer funds. d.provide handling of payments but usually less efficiently than other firms.2. Customer information that may be sold by banks include all of the following, EXCEPT a. loan history b. investments c. public arrest record d. bank balance9. How would you incorporate security considerations/costs into the transactions demand model? What would this imply for the demand for currency in a relatively insecure urban environment (a) compared with a relatively safe one, (b) when owner-identified smart cards become available? Do these factors affect the demand for demand deposits? How would the proportion of currency to demand deposits be affected in these cases? 10. Can the transactions demand model be used to explain why financial innovations in recent decades have reduced the transactions demand for M1? 11. Are transactions demand models useless, as Sprenkle (1969) argued? If they are, how would you explain the demand for M1 or just for demand deposits in the economy?
- QUESTION 21 A decrease in the money supply creates an excess supply of money that is eliminated by rising prices. supply of money that is eliminated by falling prices. demand for money that is eliminated by falling prices. demand for money that is eliminated by rising prices. a. b. С. d. a C QUESTION 22 Suppose the money supply grew at an average annual rate of 20%, velocity was constant, the nominal interest rate averaged 16%, and output grew at an average annual rate of 8%. According to the Quantity Theory, a. inflation averaged 6% per year and the real rate of return was 2%. b. inflation averaged 12% per year and the real rate of return was 4%. inflation averaged 10% per year and the real rate of return was 8%. inflation averaged 20% per year and the real rate of return was 6%. С. d. a C Clialc Squa All Answers to save all answers. bo O C O O O C9. Commercial banks:a) implement monetary policy.b) are nonprofit organizations that lend and borrow funds.c) are financial intermediaries that lend funds and accept deposits.d) all of the above. 11. First national bank has assets of $900,000 and liabilities of $600,000. First NationalTrust’s owner’s equity is:a) $0.b) $300,000.c) $600,000.d) $900,000.12. A bank has reserves of $40, loans of $110, deposits of $90, and owners’ equity of$60. Which of the following represents the bank’s total assets?a) $180b) $110c) $130d) $150Table 14.1: FIRST COMMERCIAL BANKAsset Liabilities___________________$150,000 Total Reserves: $1,000,000 Deposits$100,000 Required Reserves $200,000 Net Worth? Excess Reserves? Loans$1,200,000 Total $1,200,000 Total________13. Refer to Table 13. 1. First Commercial bank’s excess reserves equal $__________.a) 150,000b) 250,000c) 100,000d) 50,00014. Refer to Table 13.1. First Commercial Bank’s total loans equal $______________.a) 1,050,000b) 1,200,000c) 1,150,000d)…11. Currently, deposits are insured by the FDIC up to ___________ per depositor per bank. Question 11 options: a) $1,000,000. b) $250,000. c) $10,000. d) $100,000.