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Question
Derivatives can be a cost-effective way to manage interest rate risk.Answer
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Related questions
Q:
A London based firm has a subsidiary located in New York. The subsidiary has $1,000 in assets, $750 in liabilities and $250 in equity. The current spot rate is $1.60/£.If the spot rate changes to $1.50/£, what will be the firm's gain or loss?a. $10.42 gainb. £10.42 gainc. $10.42 lossd. £10.42 losse. cannot be determined
Q:
Which of the following is a discretionary factor that will increase a bank's daily reserves held at the Federal Reserve?
a. The prior day's immediate cash letter
b. Federal funds purchased
c. Deposits from the U.S. Treasury
d. Currency received from the Federal Reserve
e. Deficits at the local clearinghouse
Q:
The two-week period during which a bank must hold sufficient legal reserves is called the:
a. deposit computation period.
b. deposit maintenance period.
c. vault cash computation period.
d. base computation period.
e. maintenance period.
Q:
Which of the following does not directly influence the amount of required reserves a bank must hold?
a. The required reserve ratio.
b. The dollar amount of cash items in process of collection.
c. The dollar amount of demand deposits outstanding.
d. The dollar amount of money market deposit accounts outstanding.
e. The dollar amount of NOW accounts outstanding.
Q:
Which of the following is not an advantage of larger cash balances for a bank?
a. Larger cash balances reduce the need to borrow at the discount window.
b. Larger cash balances reduce the risk of bank runs.
c. Larger cash balances reduce the risk of paying penalties to the Federal Reserve.
d. Larger cash balances increase reserve balances.
e. Larger cash balances reduce a bank's interest expense.
Q:
Derivatives can be a cost-effective way to manage interest rate risk.
Q:
Banks can often replicate on-balance sheet transactions with off-balance sheet contracts.
Q:
When futures prices falls, buyers gain at the expense of sellers.
Q:
What is the earnings base at 1st State?a. 12.5%b. 17.0%c. 58.5%d. 75.5%e. 82.0%
Q:
What is 1st State's net interest margin?a. 0.6%b. 3.8%c. 4.9%d. 8.2%e. 9.8%
Q:
What is 1st State's burden?a. 2.5%b. 17.5%c. 25.0%d. 75.5%e. 82.5%
Q:
What is the equity multiplier for a bank where equity is equal to 12% of total assets?
a. 83.33
b. 1.12
c. 0.88
d. 12.00
e. 8.33
Q:
What is the return on equity for a bank that has an equity multiplier of 14, an interest expense ratio of 4%, and a return on assets of .9%?
a. 1.3%
b. 4.0%
c. 9.0%
d. 12.6%
e. 8.6%
Q:
A bank's equity multiplier measures the bank's:
a. financial leverage.
b. operating leverage.
c. credit leverage.
d. interest rate exposure.
e. duration gap.
Q:
Jumbo certificates of deposit (CDs) typically:
a. have maturities greater than 10 years..
b. are negotiable.
c. are $1 million in size.
d. All of the above
e. b. and c.
Q:
The McFadden Act of 1927 forbids national banks from underwriting equities.
Q:
The _________ repealed the Glass-Steagall Act.
a. Riegle-Neal Interstate Banking and Branching Efficiency Act
b. Gramm-Leach-Bliley Act
c. Financial Institutions Reform, Recovery and Enforcement Act
d. Federal Deposit Insurance Corporation Improvement Act
e. Depository Institutions Deregulation and Monetary Control Act
Q:
Thrifts are supervised by the Office of Thrift Supervision.
Q:
An independent bank operates a single organization that accepts deposits and makes loans.
Q:
National banks can directly take equity positions in real estate projects.
Q:
Real estate lending is popular with bank, in part, due to the growth of the secondary mortgage market.
Q:
When futures prices falls, buyers gain at the expense of sellers.
Q:
What is 1st State's return on equity?a. 0.6%b. 3.8%c. 5.0%d. 8.2%e. 13.0%
Q:
Return on equity can be decomposed into:
a. the sum of return on assets and the equity multiplier.
b. the product of return on assets and the equity multiplier.
c. the product of the profit margin and the equity multiplier.
d. the sum of the profit margin and the equity multiplier.
e. the sum of the profit margin, equity multiplier, and the interest ratio.
Q:
The volume of net deferred credit is commonly referred to as:
a. the burden.
b. NOW balances.
c. reserve requirements.
d. equity.
e. float.
Q:
Securities that require unrealized gains or losses to be recorded on the income statement are called:
a. held-to-maturity securities.
b. trading account securities.
c. available-for-sale securities.
d. revenue securities.
e. repurchase agreements
Q:
Most banks have the ability to easily raise new capital by issuing new equity.
Q:
Covered interest rate arbitrage is possible when:
a. both currencies are appreciating.
b. the actual inflation rates are identical in both countries.
c. the difference in the interest rates in two countries exactly equals the spot-to-forward exchange rate differential.
d. the difference in interest rates in two countries is out of line with the spot-to-forward exchange rate differential.
e. none of the above
Q:
A London based firm has a subsidiary located in New York. The subsidiary has $1,000 in assets, $750 in liabilities and $250 in equity. The current spot rate is $1.60/£.If the spot rate changes to $1.50/£, what will be the firm's gain or loss?a. $10.42 gainb. £10.42 gainc. $10.42 lossd. £10.42 losse. cannot be determined
Q:
Term loans are generally repaid with funds from:
a. investing cash flows.
b. issuing new debt.
c. reductions in inventory and receivables.
d. cash flows from operations.
e. redeeming marketable securities.