Questions from Financial Markets

Q: Is everybody worse off when interest rates rise?

Is everybody worse off when interest rates rise?

Q: The duration of a $100 million portfolio is 10 years.

The duration of a $100 million portfolio is 10 years. $40 million in new securities are added to the portfolio, increasing the duration of the portfolio to 12.5 years. What is the duration of the $40...

Q: If you are a banker and expect interest rates to rise in

If you are a banker and expect interest rates to rise in the future, would you want to make short-term or long-term loans?

Q: “Bank managers should always seek the highest return possible on their

“Bank managers should always seek the highest return possible on their assets.” Is this statement true, false, or uncertain? Explain your answer.

Q: “Banking has become a more dynamic industry because of more active

“Banking has become a more dynamic industry because of more active liability management.” Is this statement true, false, or uncertain? Explain your answer.

Q: Why has noninterest income been growing as a source of bank operating

Why has noninterest income been growing as a source of bank operating income?

Q: Congress allowed Oldhat to amortize the loss over the remaining life of

Congress allowed Oldhat to amortize the loss over the remaining life of the mortgage. If this technique had been used in the sale, how would the transaction have been recorded? What would be the annua...

Q: Oldhat decides to invest the $77 million in excess

Oldhat decides to invest the $77 million in excess reserves in commercial loans. What will be the impact on its capital ratio? Its risk-weighted capital ratio?

Q: The bad news about the mortgages is featured in the local newspaper

The bad news about the mortgages is featured in the local newspaper, causing a minor bank run. $6 million in deposits is withdrawn. Examine the bank’s condition after this occurs.

Q: Oldhat borrows $5.5 million in the overnight federal funds

Oldhat borrows $5.5 million in the overnight federal funds market to meet its resources requirement. What is the new balance sheet for Oldhat? How well- capitalized is the bank?