ECON 1103 In-class Assignment #15

Suppose the bank decides to invest 45 percent of its excess reserves in short-term securities in order to earn interest. The bank issues a cashier's check to a securities dealer to purchase the securities. The securities dealer deposits the check into an account at a different bank. What will ACME Bank's balance sheet look like after the check has been processed? Fill in the values in the table below. Assume a required reserve ratio of 10 percent. The balance sheet for ACME Bank is shown below.

What do the authors mean when they state that financial intermediaries can achieve economies of scale with respect to transaction costs?   A. Intermediaries can spread transaction costs across larger transaction volumes, so the cost per unit is lower.   B. Intermediaries tend to specialize in certain types of transactions, so their costs are lower because they operate at lower volume than other types of financial firms.

A financial intermediary (FI) has been borrowing overnight, from just two lenders, to fund purchases of relatively illiquid bonds. Each lender has been lending $D to the FI. Every morning, each lender has to decide whether to roll over his loan to the FI, or to withdraw his loan. Suppose that, if both lenders to the FI choose to roll over, the FI remains in business and will repay both lenders with interest: each lender will receive (1 ) + i D . If either or both of the lenders withdraws, the FI must immediately sell its bonds at low prices. In that case, each lender receives a fraction z of the money that is owed him, where z is less than one. That is to say, if one withdraws and the other doesn't, the lender who withdraws gets zD; the lender who rolls over gets z i D (1 ) + . If both withdraw, each gets zD. Make a "box" to describe this situation. In each of the four segments of the box, list what is received by "lender A" and "lender B." Circle the segment(s) of the box that is…

8, Q4) Hey, need help with the following multi-part macroeconomics problem. Thank you in advance! In this problem, consider a simple mutual fund. Households and businesses invest in the fund by buying shares; the fund uses this money, in turn, to invest in a range of assets, including equities and bonds. If an investor wishes to divest from the fund, she can “redeem” her shares. Redeeming involves selling the shares back to the mutual fund for a price called the “net asset value” (NAV). The NAV is equal to the difference between assets and liabilities, divided by the total number of investors in the fund (similar to the shareholders’ equity discussed in this chapter). The NAV is updated at the end of each day. Thus every investor who redeems on a given day will get the same price. What does this fund’s balance sheet look like? Suppose several large investors in the mutual fund start getting nervous about market conditions and decide to redeem, all on the same day. How will these…

In October 2015, amid rising fears about the security of credit card transactions, financial institutions and businesses made the transition to using chip cards. Unlike the quick swipe of a magnetic stripe on the back of traditional credit and debit cards, chip cards have to be left inside the terminal while the embedded chip verifies the transaction. While there is no consistent method for measuring transaction speed, news agencies report average chip speeds of anywhere from 8 seconds to 13 seconds. The switch to chip readers was precarious, with many businesses taping over the chip card slots in the terminals until the kinks were worked out. Even after a year, some businesses still could not process chips and continued to utilize the magnetic stripe for transactions. Financial institutions thought the additional security benefits of the chips would overshadow the added wait times. Yet a survey conducted by Harbortouch, a leading point-of-sale company, in 2016 showed that nearly four…

Why are financial intermediaries the most heavily regulated businesses in the economy? Explain why stock market is an important factor in business investment decisions? What is inflation? What explains  inflation? If there is a recession, will it be more difficult to find a job when you graduate? Explain. What are the six types of regulations the government employs in an attempt to ensure the soundness of our financial intermediaries? Explain. Explain the difference between debt and equity markets. primary and secondary markets, exchange and over the counter markets and money and capital markets. What is the difference between foreign bond and a Eurobond? Which institutions are subject to Federal Deposit Insurance corporation (FDIC) regulations, and what is the nature of the regulations? What are the reasons for high transaction costs to exist in a barter economy? What separates the assets included in M1 from the assets included in M2? Does it matter what definition of money policy…

In the mid 1800's, grain sellers in Chicago would deliver their grain to warehouses and receive a paper receipt that represented their claim on the grain in storage.  These receipts became so widely used that grain traders began to use them as money, and they would use the warehouse receipts to settle debts and as collateral to secure short-term loans.  Despite their widespread use as a form of currency, the warehouse receipts were not fiat money because:   A. Grain is a commodity, so the receipts were commodity money and not fiat money   B. The receipts were not legal tender formally recognized by a government

Suppose that you deposit $8,000 in your bank and the required reserve ratio is 15 percent. The maximum loan your bank can make as a direct result of your deposit is:   (enter a whole number)

Suppose that a new customer opens a checking account and a saving account, placing $50,000 in each. Later, the bank makes a loan of $100,000 to a business firm. For this bank, OPTIONS: assets remained unchanged but liabilities increased by $100,000 because of the loan. assets increased by $100,000 because the checking and saving accounts are assets, and liabilities increased by $100,000 because the loan is a liability. assets increased by $100,000 because the loan is an asset, and liabilities increased by $100,000 because the checking and saving accounts are liabilities. assets increased by $50,000 because the saving account is an asset, while liabilities increased by $50,000 because the checking account is a liability.

suppose that you deposit 8000 in your bank and the required reserve ration is 15 percent the maximum loan your bank can make as a direct result of your deposit is

The function of a Bank is to collect deposits from the public and lend those deposits for the development of Agriculture, Industry, Trade and Commerce. Bank pays interest at lower rates to the depositors and receives interests on loans and advances from them at higher rates. Discuss numerous functions of banks in detail and explain that how Covid-19 has affected the functions of banks. Further give details that during covid-19 what difficulties are faced by customers and bankers as well.

Use the ordinary interest method, 360 days, to solve the following word problem. Round to the nearest cent when necessary. Richie Powers is the owner of American Eagle Boats, a manufacturer of custom pleasure boats. Because of the economic recession and slow boat sales recently, American Eagle has begun accepting promissory notes from its dealers to help finance large orders. This morning American Eagle accepted a 90 day, 8.6% promissory note for $800,000 from one of its sales dealers. You are a manager for a bank, and Richie is one of your clients. Your bank's discount rate is currently 13%. Richie's goal is to discount the note as soon as possible, but not until the proceeds are at least equal to the face value of the note, $800,000. (a) As his banker, Richie has asked you to "run the numbers" at ten day intervals starting with day 20 and advise him as to when he can discount the note and still receive his $800,000. Find the bank discount (in $) for days 20, 30, and 40, and…

Suppose the assets of the Silver Lode Bank are $ 100,000 higher than on the previous day and its net worth is up $ 20,000. By how much and in what direction must its liabilities have changed from the day before?

On January 2, Burt asked Logan to loan him money “against my diamond ring.” Logan agreed to do so. To guard against intervening liens, Logan received permission to file a financing statement, and Burt and Logan signed a security agreement giving Logan an interest in the ring. Burt also signed a financing statement, which Logan properly filed on January 3. On January 4, Burt borrowed money from Tillo, pledging his ring to secure the debt. Tillo took possession of the ring and paid Burt the money on the same day. The next day, January 5, Logan loaned Burt the money under the assumption that Burt still had the ring. Who has priority, Logan or Tillo? Explain.

XYZ Corporation is trying to decide whether it should buy money market instruments or leave its funds on deposit at a commercial bank. Which of the following is an advantage of buying money market instruments over leaving funds on deposit at a commercial bank that XYZ should be aware of?   a.  ​Money market instruments offer a higher yield than leaving funds on deposit at a commercial bank.   b.  ​Money market instruments are more liquid than funds on deposit at a commercial bank.   c.  ​Money market instruments are safer than leaving funds on deposit at a commercial bank.   d.  ​Money market instruments involve a financial middleman.

A large money center bank uses the US treasury yield curve to determine the appropriate level for its lending rates. To compensate for the costs of making a loan, the bank needs to charge 1.8% point more than the expected future interest rate on a Treasury security with the same maturity if it is to make a profit. The manager is considering a loan request from a customer seeking a one year loan that starts 2 years from today. If the two-year Treasury Strip rate is 4.1% and the three-year Treasury strip rate is 5.5%, at what minimum rate should the manager be willing to make the loan commitment?Enter your answer as a % to two decimal places. Assume the expectation theory of rates is valid and all liquidity premiums are zero.

To understand the important role played by banks in the economy, we need to imagine a world without banks. REQUIRED: A. Explain how economic transactions between household savers of funds and corporate users of funds would occur in a world without financial intermediaries. Identify and explain three economic disincentives that probably would dampen the flow of funds between household savers of funds and corporate users of funds in an economic world without financial intermediaries. Identify and explain the two functions in which FIs may specialize that would enable the smooth flow of funds from household savers to corporate users. In what sense are the financial claims of FIs considered secondary securities, while the financial claims of commercial corporations are considered primary securities?

Discuss the role and function of any large financial institution in St.Lucia as well as THREE impacts that intuition has on the economy of St.Lucia. Any financial institution excluding the Central Bank.

Question 8 True or False. A living will is a document that is ambulatory until the death of the decedent and then it describes how the decedent's property should be distributed.     True     False   Question 9 Donald puts a lot of money into a bucket and gives Bernie a power of appointment over the money in the bucket. Bernie has the power to distribute that money only to himself, his creditors, his estate, or his estate's creditors. What is the correct name for his power of appointment? It is a/an:     General power of appointment     Limited power of appointment   Question 10 True or False. The spousal consent rules for the annual exclusion require the non-donor spouse to consent to all gifts made by the donor spouse in that year; he or she cannot select which gifts he or she will join and which he or she will not.     True     False

Suppose Eric 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 TouchTech, a hand-held computing firm, is selling bonds to raise money for a new lab—a practice known as  (a. equity, b. debt) finance. Buying a bond issued by TouchTech would give Eric (a. a claim to partial ownership in, b. an IOU, or promise to pay, from) the firm. In the event that TouchTech runs into financial difficulty, (a. Eric and the other bondholders, b. the stockholders) will be paid first.   Suppose instead Eric decides to buy 100 shares of TouchTech stock. Which of the following statements are correct? Check all that apply. a.TouchTech earns revenue when Eric purchases 100 shares, even if he purchases them from an existing shareholder. b. The Dow Jones Industrial Average is an example of a stock exchange where he can purchase TouchTech stock. c. An increase in the…

Bank Three currently has $600 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 10 percent of transaction deposits. (LG 4-3) If the Federal Reserve decreases the reserve requirement to 8 percent, show the balance sheet of Bank Three and the Federal Reserve System just before and after the full effect of the reserve requirement change. Assume Bank Three withdraws all excess reserves and gives out loans and that borrowers eventually return all of these funds to Bank Three in the form of transaction deposits. Redo part (a) using a 12 percent reserve requirement.

A group of college friends decide to start their own bank, LSU Community Bank, in rural Pennsylvania. In order to get started they put in a total of $10 million of their own money and borrow $40 million from a venture debt lender. (This is known as venture debt lending.) They accept $ 160 million in deposits from households and businesses in the community, and, in turn, make $ 90 million in loans. They also purchase $ 95 million of mortgage-backed securities and keep the remainder of their assets as reserves at the Philadelphia Federal Reserve District Bank. a. Show LSU Community Bank's balance sheet. b. What is LSU Community Bank's reserve-deposit ratio? C. What is LSU Community Bank's asset to equity ratio? d. Suppose the housing market tanks and the market value of the bank's mortgage-backed securities falls by 10%. i. Show LSU Community Bank's new balance sheet. ii. By what percentage does the value of the bank's assets fall? iii. By what percentage does the value of the bank's…

Suppose Yakov would like to use $8,000 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 TouchTech, a hand-held computing firm, is selling bonds to raise money for a new lab—a practice known as _______(equity/debt)    finance. Buying a bond issued by TouchTech would give Yakov_______(a claim to partial ownership in/an IOU, or promise to pay, from)    the firm. In the event that TouchTech runs into financial difficulty, ________(Yakov and the other bondholders/the stockholders)   will be paid first.   Suppose instead Yakov decides to buy 100 shares of TouchTech stock. Which of the following statements are correct? Check all that apply.   A. An increase in the perceived profitability of TouchTech will likely cause the value of Yakov's shares to rise.   B. The Dow Jones Industrial Average is an example of a stock exchange where he can purchase TouchTech stock.   C.…

QUESTION NINE  The best statement that explains the differences between Islamic and conventional bank is     A ) in the modern banking system, it has become one of the service-oriented functions of all banks to pay out zakat as their social responsibility.     B ) Islamic bank promotes risk-sharing between the provider of capital and the user of funds. In contrast, the fund provider of the conventional bank is assured of a predetermined rate of interest.     C ) both conventional and Islamic banks aim to maximize profit but are subject to different restrictions.     D ) the functions and operating modes of Islamic banks are based on Shari’ah and manmade principles.

Give at least three examples of a situation in which financialmarkets allow consumers to better time their purchases.