Loans Industry 1 Industry 2 Portfolio Weight 0.65 0.35 Annual Spread 4.25% 2.75% Fees Earned 3.0% 2.5% Loss to Fl given Default 50% 20% Expected Default 5.5% 3% Frequency Correlation 0.30 Use the table to answer the question. A financial institution has outstanding loans to two industries: Industry 1 and Industry 2. Use Moody's Analytics Portfolio Manager Model to calculate the portfolio return. ○ 3.5% O 4.55% 6.25% ○ 6.55%

Loans Industry 1 Industry 2 Portfolio Weight 0.65 0.35 Annual Spread 4.25% 2.75% Fees Earned 3.0% 2.5% Loss to Fl given Default 50% 20% Expected Default 5.5% 3% Frequency Correlation 0.30 Use the table to answer the question. A financial institution has outstanding loans to two industries: Industry 1 and Industry 2. Use Moody's Analytics Portfolio Manager Model to calculate the portfolio return. ○ 3.5% O 4.55% 6.25% ○ 6.55%

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter7: Types And Costs Of Financial Capital

Section: Chapter Questions

Problem 1bM

See similar textbooks

Similar questions

Use the following information regarding the allocation of loan portfolios in different sectors for questions 1 - 2. Real Estate Commercial and Industrial Loans to Individuals Non-Depository Other National Banks O 1.99% O 6.30% O 3.97% 6.17% O 7,46% 38.66% 25.19% 13.38% 13.98% 8.79% Bank A 49.36% 28.80% 7.64% 8.88% 5.32% Bank B 35.06% 19.88% 28.93% 14.73% 1.40% What is Bank A's standard deviation of its asset allocation proportions relative to the national banks' average?
4. Gap and Duration Analysis Take the following balance sheet, which of the assets and labilities are rate-sensitive? Which assets and liabilities are not? a. Assets Value Liabilities Value Checkable Deposits Savings Deposits Money Market Accounts 40 Long-Term Loans Long-Term Securities 75 26 100 Reserves 54 10 Variable Rate CDs 25 Short-Term Securities Variable-rate Loans 15 30 Long-Term CDs 25 b. What is the estimated rate of change of bank profit, in terms of next year's interest rate, conditional on this year's interest rate being 2%? c. Suppose that all the long-term securities that the bank holds mature in 4 years and their interest rate will be 5% in that year. What is the approximate market-value of these long-term securities in 4 years given this year's interest rate is 2%?
A financial institution uses a loan base rate of 4.35% and sets the credit risk premium at 6.68%. The institution charges a 1.5% loan origination fee and imposes 3.22% compensating balances. The required reserves for this institution are 10%. Additionally suppose your institution specifies the following linear probability model to estimate the probability of default: PD=80-8₁ Wealth - B₂Credit Score + B3 Number of Bankruptcies Bo= 10, 109.5 8₁0.10 B₂ = 0.20 B3 = 0.60 Use the information above to answer the question. What is the gross rate of return on the loan? O 9.31% O 11.03% O 12.53% 12.90%
A financial institution uses a loan base rate of 4.35% and sets the credit risk premium at 6.68%. The institution charges a 1.5% loan origination fee and imposes 3.22 % compensating balances. The required reserves for this institution are 10%. Additionally suppose your institution specifies the following linear probability model to estimate the probability of default: PD = Bo - Bi Wealth-B2Credit Score + B3 Number of Bankruptcics Bo = 10, 109.5 %3D B1 = 0.10 %3D B2 = 0.20 %3D B3 = 0.60 %3D Use the information above to answer the question. What is the gross rate of return on the loan? O 9.31% O 11.03% O 12.53% O 12.90%
Information concerning the allocation of loan portfolios to different market sectors is given below: Allocation of Loan Portfolios in Different Sectors (%) Sectors National Bank A Bank B Commercial 30% 50% 10% Consumer 40% 30% 40% Real Estate 30% 20% 50% Question: What’s the portfolio deviation from the national average for Bank A and Bank B, respectively?
How does a CDS work in terms of indicating credit risk? Time Left: 01:59:28 Tag the question Subject Finance A. The lower the CDS spread, the higher the risk B. Sub-subject Search And S The lower the CDS spread, the lower the risk C. The higher the CDS spread, the higher the risk
Loans Industry 1 Industry 2 Portfolio Weight 0.35 0.65 2.75% Annual Spread 4.25% Fees Earned 3.0% 2.5% Loss to FI given Default 50% 20% Expected Default Frequency 5.5% 3% Correlation 0.30 Use the table to answer the question. A financial institution has outstanding loans to two industries: Industry 1 and Industry 2. What is the Sharpe Ratio for this portfolio if the risk free rate is 1.5%? O 0.39 0.77 O 1.40 2.05
A credit analyst is evaluating the solvency of Alcatel-Lucent (Euronext Paris: ALU) asof the beginning of 2010. Th e following data are gathered from the company’s 2009annual report (in € millions):2009 2008Total equity 4,309 5,224Accrued pension 5,043 4,807Long-term debt 4,179 3,998Other long term liabilities* 1,267 1,595Current liabilities* 9,050 11,687Total equity + Liabilities (equals Total assets) 23,848 27,311*For purposes of this example, assume that these items are non-interest bearing, and that longterm debt equals total debt. In practice, an analyst could refer to Alcatel’s footnotes to confi rmdetails, rather than making an assumption.1 . A . Calculate the company’s fi nancial leverage ratio for 2009.B . Interpret the fi nancial leverage ratio calculated in Part A.2 . A . What are the company’s debt-to-assets, debt-to-capital, and debt-to-equity ratiosfor the two years?B . Is there any discernable trend over the two years?
Loans Industry 1 Industry 2 Portfolio Weight 0.65 0.35 Annual Spread 4.25 % 2.75% Fees Earned 3.0% 2.5% Loss to FI given Default 50% 20% Expected Default Frequency 5.5% 3% Correlation 0.30 Use the table to answer the question. A financial institution has outstanding loans to two industries: Industry 1 and Industry 2. What is the Sharpe Ratio for this portfolio if the risk free rate is 1.5 % ? Group of answer choices 0.39 0.77 1.40 2.05
Suppose a credit analyst for JPMorgan Chase, an American multinational financial services company headquartered in New York City and the world's largest bank by market capitalization, is considering a proposal to extend a short-term, one-month loan to Apple, Inc., an American multinational technology company headquartered in Cupertino, California. Which of the following financial statement ratios would best help the credit analyst assess Apple, Inc.'s ability to repay the short-term loan? O Days' sales in receivables. O The cash ratio. O The current ratio. O The return on equity ratio (ROE).
13. Suppose that an FI holds two loans with the following characteristics. Annual Spread between Loan Rate and FI's Cost of Funds Loan X₁ 0.45 0.55 1 2 5.5% 3.5 Annual Fees 2.25% 1.75 Loss to Fl Expected Given Default Default Frequency 30% 20 3.5% 1.0 P12 = -0.15 Calculate the return and risk on the two-asset portfolio using Moody's Analytics Portfolio Manager.
Suppose that the assets of a bank consist of $100 million of loans of BBB-rated corporations. The PD for the corporations is estimated as 1%. The average maturity is five years and the LGD is 60%. What is the total risk-weighted assets for credit risk under the Basel II advanced IRB approach? Question 5Answer a. $178.1 million b. $13.2 million c. $165.4 million d. $100 million