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Question
According to current projections, Social Security and other entitlement programs will soon be severely underfunded. If the government decides to cut social security benefits to future retirees and raise social security taxes on all workers, what will probably happen to the supply of funds available to the capital markets? What will be the effect on interest rates?
Answer
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Related questions
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What is the total amount of net fee revenue generated from the mortgages over the year?
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A _____ position in T-bond futures should be used to hedge falling interest rates and a _____ position in T-bond futures should be used to hedge falling bond prices.
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A bond portfolio manager has a $25 million market value bond portfolio with a 6-year duration. The manager believes interest rates may increase 50 basis points. Which of the following could be used to help limit his risk?
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II. Buy bond futures contracts.
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IV. Buy put options on the bonds.
A. I only
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A macro hedge is a hedge of a particular asset or liability exposure to a change in a macroeconomic variable.
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The bank's one-year repricing gap is (Million $)A. $425.B. $285.C. $74.D. $140.E. $66.
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Due to convexity problems, banks are actually better off using the simpler repricing model to manage interest rate risk rather than the duration model.
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The cash flow from the interest a bank receives on a long-term loan that is normally reinvested is called the runoff from the loan.
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If a bank has a negative repricing gap, falling interest rates increase profitability.
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In a bank's three-month maturity bucket, a 30-year ARM with a rate reset in six months would be considered a fixed rate asset, but in its one-year maturity bucket, this ARM would be considered a rate-sensitive asset.
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Why might a bank face abnormal deposit drains?
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Explain the relationship between each of the following ratios and liquidity risk.
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b) Borrowed funds to total assets
c) Loan commitments to total assets
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Explain how liquidity risk can lead to insolvency risk.
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In the absence of deposit insurance, a deposit is a _______________ to the bank's assets.A. pro rata claimB. first come/first serve claimC. full pay or no pay claimD. both A and BE. both B and C
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Q:
A four-class CMO has Class A, Class B, Class C, and the residual Class Z securities outstanding. Which class has the longest duration?
A. Class A
B. Class B
C. Class C
D. Class Z
E. All have the same duration
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B. the bonds had variable interest rates.
C. the bonds were marketable and the loans were not.
D. the bonds were uncollateralized.
E. none of the above
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Vulture funds specialize in buying distressed loans.
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The buyer of a loan in a participation has a double-risk exposure: one to the borrower and one to the selling bank.