Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question
Which of the following actions cannot be used by banks to increase reserves?
A.
Sell Treasury bonds
B.
Sell loans
C.
Buy Treasury bonds
D.
Call loans
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- Nonbank financial institutions do not earn the interest on reserves (IOR) rate. a. True b. Falsearrow_forwardH1.arrow_forwardWhich of the following is NOT an advantage of depositing funds into a bank account (compared to directly purchasing corporate bonds and shares): Options 1. Higher transactions costs 2. Monitoring performed by the bank on behalf of the depositor 3. Better liquidity if funds are needed quickly 4. Efficient payment services 5.Reduced price risk if funds are needed immediatelyarrow_forward
- What are some of the ways that banks can borrow short-term funds when they need "liquidity"?(Select all that apply; three of the answers below are correct.) Reference: Chapters 11 & 12 They can borrow directly from the Securities & Exchange Commission through the "regulatory" market. They can borrow from the Department of Treasury through the "Treasury" window. They can borrow another bank's reserves through the "fed funds" market. The can engage in a "sale & repurchase agreement" (or "repo") by selling some of their securities to another financial insitution and promising to buy them back the next day. They can borrow directly from the Federal Reserve through the "discount window".arrow_forward6) Bruce the Bank Manager can reduce interest rate risk by assets to increase their rate sensitivity or, alternatively, liabilities. A) shortening; lengthening B) shortening; shortening C) lengthening; lengthening D) lengthening; shortening the duration of the bank's the duration of the bank'sarrow_forwardFractional reserve banking refers to a banking system in which bank loans are less than bank reserves. bank deposits are less than bank reserves. bank reserves are less than total deposits. bank reserves are only a fraction of required reserves.arrow_forward
- What risks might commercial banks face if they use short-term deposits from savers to pay for long-term loans, like mortgages, that often have fixed interest rates? What could the financial institution do to lower these risks?arrow_forwardWhat is evergreening in banking and why it may arise as an equilibrium choice of banks. Carefully explain all relevant concepts and mechanisms. Additionally discuss how much of a problem this may present in the aftermath of a banking crisis.arrow_forwardD3) Finance Use covered interest rate parity (CIP) to show that a fixed exchange rate and free capital flows imply that a central bank cannot set the interest rate independently from the interest rate set by the reference currency's central bank.arrow_forward
- Why are the bonds treated as a conservative investment? Do you think the treasury bills are risk-free assets?arrow_forwardIn the federal funds markets, financial institutions can borrow money from the Federal Reserve. True False Assuming the STRIPS are held to maturity, their investors know the precise payouts they'll receive. True Falsearrow_forwardIf a bank finds that its ROE is too low because it has toomuch bank capital, what can it do to raise its ROE?arrow_forward
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