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H5.
The bank have an incentive to value the new securities at a higher price because they will gain more. Is that a good or bad strategy? Explain why
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- If a bank has a positive repricing gap (RSAs > RSLs), then: Does this bank have reinvestment or refinancing risk? If interest rates increase, net interest income will: A. Reinvestment risk, increase B. Reinvestment risk, decrease C. Refinancing risk, increase D. Refinancing risk, decreaseThe central bank takes action that lowers interest rates dramatically. what is the effect of it to firm value? increase or decrease and why.We think of banks as being interest rate intermediaries. That is, the borrow cheaply, and then lend at higher rates, and the spread between those is their profit. But, besides interest rates, what other sorts of risks do banks face?
- Complete the following table : Aggressive IS Gap ManagementDefensive IS Gap Management Rising Market Interest Rates What steps will a bank take to put in place an aggressive /defensive strategy in the face of rising interest rates. Paragraph BIEEIf the Bank of England wanted to discourage investment spending and reduce aggregate demand, it could Select one: O a. buy securities on the open market O b. reduce the required reserve ratio O c. lower the discount rate O d. sell securities on the open market1) What id the essential purpose for financial markets? 2) Which is more important, the primary market for stocks of the secondary market? Why? 3) How does a ponzi scheme work? 4) Discuss some of the forces that help make markets efficient? 5) What are institutional investors? Why are they needed in our economy? 6) What are some of the differences between a forward contract and a future contract?
- 3. Consider the monetary neutrality. Suppose that the central bank changed the money supply. According to economists’ assumption on monetary neutrality, could the change affect the employment in the short-run? How about in the long-run? Short-run: Long-run:All else being equal, if a central bank sells government bonds from the market it would: a. decrease the money supply. b. decrease interest rates. c. mean the supply of loanable funds would move to the right. d. most likely decrease savings in the economy.Which of the following is a constrain for the investors? a. The mentality tontake the high risk b. Tax exemption on security trading c. Getting high income d. Liquidity needs
- A6) Finance For a bank, what is the tradeoff between having high vs. low capital reserve?Do you think some investors may take advantage of the interest rate reduction, despite economic uncertainties?What is the diferrence between finanical institutions and financial markets and Can they both run more smoother.