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Question
A bank expects to raise $20 million in new money if it pays a deposit rate of 7%. It can raise $60 million in new money if it pays a deposit rate of 7.5%. It can raise $100 million in new money if it pays a deposit rate of 8% and it can raise $120 in new money if it pays a deposit rate of 8.5%. This bank expects to earn 9.5% on all money that it receives in new deposits. What is the marginal cost of deposits if this bank raises their deposit rate from 8 to 8.5%?
A) 11%
B) 8.75%
C) 7.75%
D) 7%
E) .5%
Answer
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Related questions
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One part of interest rate risk is . This part of interest rate risk reflects that as interest rates rise, prices of securities tend to fall.
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A(n)__________________________ duration gap means that for a parallel increase in all interest rates the market value of net worth will tend to increase.
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Maryellen Epplin notices that a particular T-Bill has a bankers discount rate of 9% in the Wall Street Journal. She knows that this T-Bill has 20 days to maturity and has a face value of $10,000. What is the yield to maturity on this T-Bill?
A) 9%
B) .5%
C) 4.5%
D) 9.17%
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The Harris State Bank has $2000 in total assets (all of which are earning assets), $500 of which will be repriced in the next 90 days. This bank also has $1600 in total liabilities, $1000 of which will be repriced in 90 days. The bank currently earns 9% on its assets and pays 4% on its liabilities. If interest rates on both assets and liabilities fall by 2% in the next 90 days, what would be this banks net interest margin?
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The Harris State Bank has $2000 in total assets (all of which are earning assets), $500 of which will be repriced in the next 90 days. This bank also has $1600 in total liabilities, $1000 of which will be repriced in 90 days. The bank currently earns 9% on its assets and pays 4% on its liabilities. If interest rates on both assets and liabilities rise by 2% in the next 90 days, what should happen to this banks net interest margin?
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B) It should fall
C) It should stay the same
D) Cannot be determined from the information given
Q:
Which of the following would be an example of a nonrepriceable liability?
A) Money the bank has borrowed from the money market
B) Cash in the vault
C) Demand deposits that do not pay an interest rate
D) Short term securities issued by the government about to mature owned by the bank
E) All of the above are examples of repriceable assets
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A) Default risk
B) Inflation risk
C) Liquidity risk
D) Call risk
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U.S. banks tend to fare best when the yield curve is:
A) Flat
B) Downward-sloping
C) Vertical
D) Upward-sloping
E) Kinked
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A bond has a face value of $1000 and coupon payments of $80 annually. This bond matures in three years and is selling for $1000 in the market. Market interest rates are 8%. What is this bond's duration?
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B) 2.78 years
C) 1.95 years
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Harrison Bank has the following financial information. ROE
16% Net Income
$1000 Total Assets
$62,500 Total Equity
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B) 10%
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Net Profit Margin
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$62,500 Total Equity
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B) 10 %
C) 12.8%
D) 16%
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$100
Interest Income
$400 Securities Investments
$600
Interest Expenses
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$1200
Non-Interest Income
$50 Net Premises and Equip.
$300
Non-Interest Expenses
($100) Total Assets
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$1100
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$800
Securities Gains (Losses)
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$300
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$100
Interest Income
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$600
Interest Expenses
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Non-Interest Income
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$300
Non-Interest Expenses
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$1100
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$800
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($40) Equity Capital
$300
Taxes
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A) 20.45%
B) 18.33%
C) 12.22%
D) 7.33%
E) 2.5%
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A) Failure of banks computer system
B) Closure of a bank for three months due to flooding from a major hurricane
C) Embezzlement of funds of a bank by a teller of the bank
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C) As
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A) 14.96 times
B) 1.58 times
C) 1.17 times
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A) Demand deposits/ total assets
B) Interest on time deposits/ total time deposits
C) Interest on real estate loans/ total real estate loans
D) Interest sensitive assets/ interest sensitive liabilities
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A bank that has a high asset utilization (AU) ratio most likely:
A) Is doing a poor job of controlling expenses
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A bank that has a low profit margin most likely:
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B) Has a small amount of financial leverage
C) Has a small amount of liquidity risk
D) Has assets that are not very productive
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A) Net loans/total assets
B) Interest sensitive assets/interest sensitive liabilities
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OE for a bank reflects:
A) How well the assets of the bank are managed
B) The bank's use of leverage
C) How well the bank controls expenses
D) All of the above
E) None of the above
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A) Counterparty risk
B) Interest-rate risk
C) Operating risk
D) Credit risk
E) Liquidity risk
Q:
Possible breakdowns in quality control, inefficiencies in producing and delivering financial services, weather damage, aging or faulty computer systems and simple errors in judgment by bank management illustrate what form of risk faced by banks?
A) Credit risk
B) Liquidity risk
C) Interest-rate risk
D) Operational risk
E) None of the above
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The Internal Capital Growth Rate for a bank is a function of which of the following factors?
A) Profit margin.
B) Asset utilization.
C) Equity multiplier.
D) Earnings retention ratio.
E) All of the above.
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is long-term debt capital whose claims legally follow claims of depositors.
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represents funds set aside for contingencies such as legal action against the institution as well as providing a reserve for dividends expected to be paid but not yet declared and a sinking fund to retire stock or debt in the future.