Question

Why are loans such a high percentage of total assets at the typical bank? What four...

Why are loans such a high percentage of total assets at the typical bank? What four broad classes of loans do banks engage in? Most non-financial firms would never hold as much of their assets in safe liquid securities as banks do. Why do banks maintain such a high percentage of investment in securities?

Homework Answers

Answer #1

Proper solution is given.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Why are loans such a high percentage of total assets at the typical bank? What four...
Why are loans such a high percentage of total assets at the typical bank? What four broad classes of loans do banks engage in? Most non-financial firms would never hold as much of their assets in safe liquid securities as banks do. Why do banks maintain such a high percentage of investment in securities? Please explain thank you
6. Consumer loans, mortgage loans, government and municipal securities, and reserves will be found in the...
6. Consumer loans, mortgage loans, government and municipal securities, and reserves will be found in the ____ of a typical depository institution. Select one: a. asset category in the balance sheet b. income statement c. capital category of the balance sheet d. liability category of the balance sheet 7. An investor will engage in a short sell when he/she expects the stock price to ____ in the future. Select one: a. increase b. fall c. remain the same d. increase...
For a typical bank with more rate-sensitive liabilities than assets, the use of floating-rate loans is...
For a typical bank with more rate-sensitive liabilities than assets, the use of floating-rate loans is beneficial for all but which of the follow reasons? A interest rate risk is transformed into credit risk B less need for other measures such as interest rate swaps, simplifying operations C overall bank interest rate risk is lowered, resulting in better inrerest rate stress test results D net interest margin does not fall as much when rates rise, helping maintain Net Income
Assume bank a has a 5 percent tier 1 leverage ratio and a large percentage of...
Assume bank a has a 5 percent tier 1 leverage ratio and a large percentage of assets are invested in treasury securities. Bank B has an 8 percent Tier 1 leverage ratio and a large percentage of assets are invested in consumer debt. How would Bank A compare to Bank B base on the capital and asset quality criteria of the CAMELS system? a- Bank A is safer based on both criteria b- Bank B is safer based on both...
1) a) What is the “maturity” of a bank asset or liability? b) How do non-financial...
1) a) What is the “maturity” of a bank asset or liability? b) How do non-financial firms tend to structure the maturities of their assets relative to bonds used to fund the asset purchases (I.e., do they match maturities, use S-T debt to fund L-T assets, or visa-versa?)   c) How does your answer to “b” differ for commercial banks? What is the reason for this difference? (BONUS­): Provide an example to illustrate why the anticipated maturity of an asset and/or...
The bank balance sheet below lists the categories of assets and liabilities, along with the 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...
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...
1. Which is MOST liquid? a. a mortgage loan b. checkable deposits in a bank c....
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...
1. Under the requirements of the Basel Accords, a bank that holds a higher share of...
1. Under the requirements of the Basel Accords, a bank that holds a higher share of its total assets as consumer loans relative to government securities will be required to hold capital compared to a bank that holds a lower share of consumer loans to government securities. A. more B. less C. the same 2.) Which of the following is a reason why the sub-prime mortgage market expanded significantly over the period 2001-2007? A. High investor demand for safer assets...
Question 14 a)Allen would like to open a business to produce a software that he thinks...
Question 14 a)Allen would like to open a business to produce a software that he thinks wouldbe well-received by the market. However, the investment needed to start a busi-ness is very high and Allen could barely cover it on his own. The software isvery likely to be successful and generate profits, but it takes 2 years beforeprofits are generated. Explain why the existence of a financial intermediary, likea bank, makes Allen’s investment more likely. [4 marks] b)Banks are financial intermediaries...