Questions from Financial Markets

Q: Northbrook Bank purchases a four-year cap for a fee of

Northbrook Bank purchases a four-year cap for a fee of 3 percent of notional principal valued at $100 million, with an interest rate ceiling of 9 percent, and LIBOR as the index representing the marke...

Q: Iowa City Bank purchases a three-year interest rate floor for

Iowa City Bank purchases a three-year interest rate floor for a fee of 2 percent of notional principal valued at $80 million, with an interest rate floor of 6 percent, and LIBOR representing the inter...

Q: Use the following information to determine the probability distribution of per unit

Use the following information to determine the probability distribution of per unit gains from selling Mexican peso futures. The spot rate of peso is $.10. The price of peso futures per unit is $.102...

Q: Use the following information to determine the probability distribution of net gains

Use the following information to determine the probability distribution of net gains per unit from purchasing a call option on British pounds: The spot rate of the British pound = $1.45 The premium on...

Q: Assume the following exchange rate quotes on British pounds: /

Assume the following exchange rate quotes on British pounds: Explain how locational arbitrage would occur. Also explain why this arbitrage will realign the exchange rates.

Q: Assume the following information: British pound spot rate = $

Assume the following information: British pound spot rate = $1.58 British pound one-year forward rate = $1.58 British one-year interest rate = 11% U.S. one-year interest rate = 9% Explain how U.S. inv...

Q: Suppose a bank earns $201 million in interest revenue but pays

Suppose a bank earns $201 million in interest revenue but pays $156 million in interest expense. It also has $800 million in earning assets. What is its net interest margin?

Q: If a bank earns $169 million net profit after tax and

If a bank earns $169 million net profit after tax and has $17 billion invested in assets, what is its return on assets?

Q: Explain why the credit crisis affected the ability of financial institutions to

Explain why the credit crisis affected the ability of financial institutions to access short-term financing in the money markets.

Q: If a bank earns $75 million net profits after tax and

If a bank earns $75 million net profits after tax and has $7.5 billion invested in assets and $600 million equity investment, what is its return on equity?