Question

A bank could reduce the magnitude of its negative gap (make it closer to zero) by:

A) decreasing its long-term securities as a percentage of total assets

B) increasing its short-term deposit funding as a percentage of total assets

C) using more short-term non-core purchased liabilities

D) all of the above

E) none of the above

Answer #1

The answer is B) increasing its short-term deposit funding as a percentage of total assets.

A bank could reduce the magnitude of its negative gap (make it closer to zero) by:

A) decreasing its long-term securities as a percentage of total assets

**B) increasing its short-term deposit funding as a
percentage of total assets**

C) using more short-term non-core purchased liabilities

D) all of the above

E) none of the above

This is due to the reason that a negative gap, or a ratio less than one, occurs when a bank's interest rate sensitive liabilities exceed its interest rate sensitive assets. The ratio is a measure of the difference between rates on short term assets and short term liabilities. In order to improve the negative ratio, we will increase short term assets.

Bank A is a retail universal bank operating in a fast changing
interest rate environment. The bank’s balance sheet has the
following features:
Deposits: TL 12.0bn 3 months of average maturity average deposit
interest rate: 6%
Borrowings: TL 8.0bn 12 months of average maturity average
borrowing interest rate: 8%
Loans: TL 15.0bn 16 months of average maturity average loan
interest rate: 12%
Securities: TL 10.0bn 24 months of average maturity average
securities interest rate: 10%
Capital: TL 2.0bn
Reserve requirements:...

Consider the following bank balance sheet (fixed rates and pure
discount securities unless indicated otherwise). Interest rates on
liabilities are 10 percent and on assets are 12 percent. Assets $m
Duration (years) Liabilities and Equity $m Duration (years)
Prime-Rate Loans (rates set daily) 50 1.0 Super Now Checking
Accounts (rates set daily) 100 1.0 2-Year Car Loans 65 1.0 6-Month
Certificates of Deposit 40 0.5 30-Year Mortgages 60 7.0 3-Year
Certificates of Deposit 25 3.0 Total Assets 175 ? Total...

The bank balance sheet below lists the categories of assets and
liabilities, along with the total amount of each
category, and the amount in each category that is "interest rate
sensitive" or repriced within one year.
Calculate the existing Dollar Gap for the bank. Next, calculate the
effect (change) on this bank's Net Interest
Income if interest rates fall or decrease by 0.50 percentage points
or 50 bp. "%" denotes either the current
interest rate earned earned or paid on...

The bank balance sheet below lists the categories of assets and
liabilities, along with the total amount of each
category, and the amount in each category that is "interest rate
sensitive" or repriced within one year.
Calculate the existing Dollar Gap for the bank. Next, calculate the
effect (change) on this bank's Net Interest
Income if interest rates fall or decrease by 1 percentage point or
100 bp. "%" denotes either the current
interest rate earned earned or paid on...

Use the data provided for Gotbucks Bank, Inc., to answer this
question.
Gotbucks Bank, Inc. (in $ millions)
Assets
Liabilities and Equity
Cash
$
45
Core deposits
$
28
Federal funds
35
Federal funds
65
Loans
(floating)
120
Euro CDs
145
Loans (fixed)
80
Equity
42
Total assets
$
280
Total liabilities
and equity
$
280
Notes to the balance sheet: Currently, the fed funds rate is 10
percent. Variable-rate loans are priced at 3 percent over LIBOR
(currently at...

please show work thank you!!!!!!!
1. Bank of RGV is a successful
regional bank with common equity share outstanding 1 million. It
pays $10 dividend each year and expected to grow 5% in period 1.
The appropriate discount rate to reflect shareholder risk is 10%.
Answer below question using below data pertains to Bank of RGV:
Below numbers are in 1000’s.
Balance
sheet
Income statement
Cash
$100
Interest income
$400
Securities investments
$600
interest expense...

1. Which is MOST liquid?
a. a mortgage loan
b. checkable deposits in a bank
c. a new truck
d. a diamond
2. An illiquid bank is one that:
a. borrows in the market for federal funds.
b. borrows at the discount window.
c. has more short-term liabilities than short-term assets.
d. has more long-term assets than liabilities.
3. As the reserve ratio rises:
a. a bank's opportunity cost of holding reserves rises.
b. the interest rate on money will...

6. Bank A has chequable deposits of $100 million, vault cash
equalling $1 million and deposits at the Bank of Canada equalling
$14 million. If the desired reserve rate is ten percent what is the
maximum amount Bank A could lend? a. $14 million b. $5 million c.
$4 million d. $90 million
7. Financial intermediaries reduce the problems in lending
associated with information asymmetries by all of the following
except: a. collecting and processing standardized information. b.
screening applicants...

1- Please use the information for this question and the
following.
A- A bank is considering two securities: a 30-year Treasury bond
yielding 7% and a 30-year municipal bond yielding 5%. If the bank's
tax rate is 30%, what is the tax-equivalent yield of the municipal
bond? Please express as a %.
B- Which bond gives the investor a better tax-equivalent
yield?
2- Please use the information in this question for the next four
questions, including this one. Below is...

Analyzing, Forecasting, and Interpreting Both Income
Statement and Balance Sheet
Following are the income statements and balance sheets of
Amazon.com Inc.
AMAZON.COM INC.
Consolidated Statement of Operations
$ millions
Dec. 31, 2015
Dec. 31, 2014
Net product sales
$79,268
$70,080
Net service sales
27,738
18,908
Total net sales
107,006
88,988
Operating expenses
Cost of sales
71,651
62,752
Fulfillment
13,410
10,766
Marketing
5,254
4,332
Technology and content
12,540
9,275
General and administrative
1,747
1,552
Other operating expense (income), net
171
133...

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