Questions from Financial Markets

Q: Seattle Bank just took speculative positions by borrowing Canadian dollars and converting

Seattle Bank just took speculative positions by borrowing Canadian dollars and converting the funds to invest in Australian dollars. Explain a possible future scenario that could adversely affect the...

Q: Why do banks invest in securities, even though loans typically generate

Why do banks invest in securities, even though loans typically generate a higher return? How does a bank decide the appropriate percentage of funds that should be allocated to each type of asset? Exp...

Q: Explain the dilemma faced by banks when determining the optimal amount of

Explain the dilemma faced by banks when determining the optimal amount of capital to hold. A bank’s capital is less than 10 percent of its assets. How do you think this percentage would compare to tha...

Q: Explain how some mortgage operations by some commercial banks (along with

Explain how some mortgage operations by some commercial banks (along with other financial institutions) played a major role in instigating the credit crisis that began in 2008.

Q: Explain how banks use credit default swaps.

Explain how banks use credit default swaps.

Q: Compare and contrast the retail CD and the negotiable CD.

Compare and contrast the retail CD and the negotiable CD.

Q: Define federal funds, the federal funds market, and the federal

Define federal funds, the federal funds market, and the federal funds rate. Who sets the federal funds rate? Why is the federal funds market more active on Wednesday?

Q: Describe the process of borrowing from the Federal Reserve. What rate

Describe the process of borrowing from the Federal Reserve. What rate is charged, and who sets it? Why do banks commonly borrow in the federal funds market rather than through the Federal Reserve?

Q: Assume that (1) investors and borrowers expect that the economy

Assume that (1) investors and borrowers expect that the economy will weaken and that inflation will decline, (2) investors require a small liquidity premium, and (3) markets are partially segmented an...

Q: How are banks’ balance sheet decisions regulated?

How are banks’ balance sheet decisions regulated?