Questions from Financial Markets

Q: Calculate the change in the market value of assets and liabilities when

Calculate the change in the market value of assets and liabilities when the average duration of assets is 3.60, the average duration of liabilities 0.88, and interest rates increase from 5% to 5.5%.

Q: The following financial statement is for the current year. After you

The following financial statement is for the current year. After you review the data, calculate the duration gap for the bank.

Q: If the First National Bank sells $10 million of its securities

If the First National Bank sells $10 million of its securities with maturities greater than two years and replaces them with securities maturing in less than one year, what is the income gap for the b...

Q: A bank almost always insists that the firms it lends to keep

A bank almost always insists that the firms it lends to keep compensating balances at the bank. Why?

Q: “Because diversification is a desirable strategy for avoiding risk, it

“Because diversification is a desirable strategy for avoiding risk, it never makes sense for a financial institution to specialize in making specific types of loans.” Is this statement true, false, or...

Q: Why are secured loans an important method of lending for financial institutions

Why are secured loans an important method of lending for financial institutions?

Q: Why is being nosy a desirable trait for a banker?

Why is being nosy a desirable trait for a banker?

Q: In the aftermath of the global financial crisis, U.S

In the aftermath of the global financial crisis, U.S. government budget deficits increased dramatically, yet interest rates on U.S. Treasury debt fell sharply and stayed low for many years. Does this...

Q: “If more customers want to borrow funds at the prevailing interest

“If more customers want to borrow funds at the prevailing interest rate, a financial institution can increase its profits by raising interest rates on its loans.” Is this statement true, false, or unc...

Q: Can a financial institution keep borrowers from engaging in risky activities if

Can a financial institution keep borrowers from engaging in risky activities if there are no restrictive covenants written into the loan agreement?