Questions from Financial Markets

Q: NewBank decides to invest $45 million in 30-day T

NewBank decides to invest $45 million in 30-day T-bills. The T-bills are currently trading at $4,986.70 (including commissions) for a $5,000 face value instrument. How many do they purchase? What does...

Q: On the third day of operations, deposits fall by $5

On the third day of operations, deposits fall by $5 million. What does the balance sheet look like? Are there any problems?

Q: To meet any shortfall in the previous question, NewBank will borrow

To meet any shortfall in the previous question, NewBank will borrow the cash in the federal funds market. Management decides to borrow the needed funds for the remainder of the month (now 29 days). Th...

Q: The end of the month finally arrives for NewBank, and it

The end of the month finally arrives for NewBank, and it receives all the required payments from its mortgages, commercial loans, and T-bills. How much cash was received? How are these transactions re...

Q: NewBank also pays off its fed funds borrowed. How much cash

NewBank also pays off its fed funds borrowed. How much cash is owed? How is this recorded?

Q: X-Bank reported an ROE of 15% and an ROA

X-Bank reported an ROE of 15% and an ROA of 1%. How well capitalized is this bank?

Q: For the upcoming week, Nobel National Bank plans to issue $

For the upcoming week, Nobel National Bank plans to issue $25 million in mortgages and purchase $100 million in 31-day T-bills. New deposits of $35 million are expected, and other sources will generat...

Q: The balance sheet of TriBank starts with an allowance for loan losses

The balance sheet of TriBank starts with an allowance for loan losses of $1.33 million. During the year, TriBank charges off worthless loans of $0.84 million, recovers $0.22 million on loans previousl...

Q: Why do equity holders care more about ROE than about ROA?

Why do equity holders care more about ROE than about ROA?

Q: You have paid $980.30 for an 8% coupon

You have paid $980.30 for an 8% coupon bond with a face value of $1,000 that matures in five years. You plan on holding the bond for one year. If you want to earn a 9% rate of return on this investmen...