Consider a bank that has made a large number of loans at a fixed interest rate of 4% and pays 3% interest to depositors. Assume that interest rates go up. New loans are now being made at 6% throughout the economy and depositors are being paid 5% interest. How does this change affect the bank's financial position? (1oin
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- A mortgage 105m is a loan that a person makes to purchase a house. Table 19.11 provides a list of the mortgage interest rate for several different years and the rate of inflation for each of those years. In which years would it have been better to be a person borrowing money from a bank to buy a home? In which years would it have been better to be a bank lending money?Calculate the equity each of these people has in his or her home: Fred just bought a house for 200,000 by putting 10 as a down payment and borrowing the rest from the bank. Freda bought a house for 150,000 in cash, but if she were to sell it now, it would sell for 250,000. Frank bought a house for 100,000. He put 20 down and borrowed the rest from the bank. However, the value of the house has now increased to 160,000 and he has paid off 20,000 of the bank loan.Rio Tinto pays a tee to a bank for its assistance during an issue of securities. Rio Tinto does NOT have a deposit account at that bank. The bank deposits at the bank receiving the fee and the bank deposits in the banking system OA decrease; decrease O B. do not change: decrease do not change; do not change OD. increase; decrease OE decrease: do not change
- 2. A bank charges 11% discount on short term loan& Find the sum received by the borrowerwho requests Php1,500 from October 3, 2011 to March 01, 2012, Use exact simple interest.1. Financial institutions in the U.S. economy Suppose Charles would like to use $4,000 of his savings to make a financial investment. One way of making a financial investment is to purchase stock or bonds from a private company. Suppose Touch Tech, a hand-held computing firm, is selling stocks to raise money for a new lab-a practice known as v finance. Buying a share of Touch Tech stock would give Charles vthe firm. In the event that TouchTech runs into financial difficulty, ▼ will be paid first. Suppose Charles decides to buy 100 shares of Touch Tech stock. Which of the following statements are correct? Check all that apply. O Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Charles's shares to decline. O The price of his shares will rise if TouchTech issues additional shares of stock. O An increase in the perceived profitability of TouchTech will likely cause the value of Charles's shares to rise. Alternatively, Charles could…Bank Risks] Banks sometimes issue large, mark etable certificates of deposits when other deposits declin e. The chart below exhibits the ratio of large time deposits to the total deposits in commercial banking industry in the US from 1995 to 2008. As you can o bserve, large time deposits had become increasingly important source of funds for banks. Note that a time deposit is an in terest-bearing bank deposit wi th a specified period of maturity. It is a mon ey deposit at a banking in stitution that cannot be withdrawn for a specific term or period of time. FRED - Large Time Deposits, Al Commercial Banks/Deposits, Al Commercial Bariks 0.32 0.30 0.28 0.26 0.24 0.22 020 0.18 a16 014 0.12 1996 1998 2000 2002 2004 2006 2008 Source Board of Governors of the Federal Reserve System (US) mytredig/F2kV What type of bank risk(s) (Liqui dity risk, credit risk, interest-rate risk, trading risk) does more likely account for this increase in large time dep osits and why? B. of U.S. S/BIl. of U.S. S
- Which of the following statement/(s) is/are false-Statement I: Savings deposit do not have restriction on number of withdrawal and deposit in a day. Statement II: Savings deposits do not offer overdraft facility to depositor. Statement IlI: Saving deposit holders can earn interest on available balance. O a. Statement I1&lI O b. Statement 1&lII c. Statement I & II O d. Only statement II is false. Clear my choiceBy. the interest rate on loans or approving loans with credit risk, a bank could expand its lending activities. a. increasing; lower b. increasing; greater O c. decreasing; lower d. decreasing; greater1. Financial institutions in the U.S. economy Suppose Van would like to use $9,000 of his savings to make a financial investment. One way of making a financial investment is to purchase stock or bonds from a private company. Suppose RoboTroid, a robotics firm, is selling bonds to raise money for a new lab-a practice known as finance. Buying a bond issued by RoboTroid would give Van v the firm. In the event that RoboTroid runs into financial difficulty, will be paid first. Suppose instead Van decides to buy 100 shares of RoboTroid stock. Which of the following statements are correct? Check all that apply. O RoboTroid earns revenue when Van purchases 100 shares, even if he purchases them from an existing shareholder. O The Dow Jones Industrial Average is an example of a stock exchange where he can purchase RoboTroid stock. O Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Van's shares to decline. Alternatively, Van could make a…
- 4-- Suppose a bank's balance sheet looks like this. The bank is required to hold reserves equal to 10% of deposits. Assets Reserves Loans Total Assets $ 800 $ Liabilities 5200 $ 6000 $ Deposits 6000 Total Liabilities LA 6000 a. How much excess reserves does the bank hold? b. How much more can this bank lend?1. Financial institutions in the U.S. economy Suppose Yakov would like to use $6,000 of his savings to make a financial investment. One way of making a financial investment is to purchase stock or bonds from a private company. Suppose RoboTroid, a robotics firm, is selling stocks to raise money for a new lab-a practice known as finance. Buying a share of RoboTroid stock would give Yakov the firm. In the event that RoboTroid runs into financial difficulty, will be paid first. Suppose Yakov decides to buy 100 shares of RoboTroid stock. /hich the following statements are correct? Check all that apply. O An increase in the perceived profitability of RoboTroid will likely cause the value of Yakov's shares to rise. O Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Yakov's shares to decline. O The price of his shares will rise if RoboTroid issues additional shares of stock. Alternatively, Yakov could make a financial investment by…Vol) 7.60 LTE KB/s 4G+ 11:46... pert.chegg.com + [1 Chegg Home Expert Q&A My solutions Student question ☐ Notifications 67 Time Left: 00:09:46 Transaction One: Open a Bank and Accept Deposits Name your Bank Draw a T - Account Representing Deposits of $2 million Transaction Two: Grant a Loan The Reserve Requirement is 20% Customer A wants to borrow $1 million. Customer B wants to borrow $400,000. Customer C wants to borrow $300,000. Can you fulfill all three loan requests? Draw a T - Account Representing a bank that is fully "loaned up" (reduce the loan amount to Customer C if necessary) Transaction Three: Follow the Money Creation Process Customer A deposits his loan with his home bank, Bank of Taylor Draw a T - Account Representing this transaction for Bank of Taylor assuming they already have $1.5 million in deposits and loans in the amount of $700,000 Transaction Four: Calculate the Money Creation Effect What is the money multiplier rate in this example? If banks in this economy are…