A bank that expects interest rates to increase in the future will wants to hold more rate sensitive asset and fewer rate sensitive liabilities. (Choose the correct option)

1. Financial institutions in the U.S. economy Suppose Clinton decides to use $1,000 currently held as savings to make a financial investment. One method of making a financial investment is the purchase of stock or bonds from a private company. 1. Suppose Warm Breeze, a cloud computing firm, is selling bonds to raise money for a new lab. This practice is called     finance. Buying a bond issued by Warm Breeze would give Clinton (an IOU, or promise to pay/ a claim to partial ownership in) the firm. In the event that Warm Breeze runs into financial difficulty, (the stockholders/ Clinton and the other bondholders) will be paid first. 2.   Which of the following statements are correct? Check all that apply. - The price of his shares will rise if Warm Breeze issues additional shares of stock. - The Dow Jones Industrial Average is an example of a stock exchange where he can purchase Warm Breeze stock. - Expectations of a recession that will reduce economywide corporate profits will likely…

How do banks manage interest rate risk? (Select all that apply) 1. Banks can increase their borrowings to manage interest rate risk  2. Interest rate swaps can reduce interest rate risk exposure  3. Banks can reduce interest rate risk by making more floating rate loans  4. Banks can manage interest rate risk by keeping some funds as repurchase agreements

4-- Suppose a bank's balance sheet looks like this. The bank is required to hold reserves equal to 10% of deposits. Assets Reserves Loans Total Assets $ 800 $ Liabilities 5200 $ 6000 $ Deposits 6000 Total Liabilities LA 6000 a. How much excess reserves does the bank hold? b. How much more can this bank lend?

6. Answer all of the following: As a first-year student, you need to borrow £40,000 in order to finance your university education. You intend to repay this loan over time after you graduate. Explain why seeking out an individual saver to borrow money from could be problematic. Then identify which service a bank provides to the economy that eliminates this problem. (a) (b) Borrowing from the central bank or other banks is a short-term solution for a bank when it is illiquid. What do you think would be a more long-term solution if a bank is persistently illiquid? (c) Why is the short-term interest rate equal to the base rate?

4. The subprime mortgage market The financial crisis started with defaults-borrowers not repaying their loans-on subprime mortgages in the United States. Subprime mortgages have which of the following characteristics? Check all that apply. They have a higher likelihood of default. They are made to people with relatively poor credit history. They are made to people with relatively few assets. Subprime mortgages expanded to about 35% of all mortgages issued in the United States in 2004. Which of the following contributed to the growth of these mortgages? Check all that apply. Decreased regulation of the financial sector A shift to lower-risk investments by investors The Federal Reserve setting low interest rates in the early part of the 2000s The expectation that housing prices would keep rising