Bank discount is computed by using Question 12 options: Discount= Face value x Discount Rate x term of discount Discount= maturity Value x Discount Rate x term of discount Proceeds= Maturity value - Bank discount maturity value= Face value x discount rate
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12
Bank discount is computed by using
Question 12 options:
|
Discount= Face value x Discount Rate x term of discount |
|
Discount= maturity Value x Discount Rate x term of discount |
|
Proceeds= Maturity value - Bank discount |
|
maturity value= Face value x discount rate |
Step by step
Solved in 2 steps
- Round Deposits Required Reserves of 20% Excess Reserves New Loans 50% of loan proceeds are held as currency in circulation by people Loan proceeds redeposited 1 $500 $100.00 $400.00 $400.00 $200.00 $200.00 2 $200 $40 $160 $160 $80 $80 3 $80 $16 $64 $64 $32 $32 4 $32 $6.40 $25.60 $25.60 $12.80 $12.80 5 $12.80 $2.56 $10.24 $10.24 $5.12 $5.12 6 $5.12 $1.02 $4.10 $4.10 $2.05 $2.05 7 $2.05 $.41 $1.64 $1.64 $.82 $.82 8 $.82 $.16 $.66 $.66 $.33 $.33 9 $.33 $.07 $.26 $.26 $.13 $.13 10 $.13 $.03 $.10 $.10 $.05 $.05 Totals $833.25 $166.65 $666.60 $666.60 $333.30 $333.30 Calculate the new money supply. Calculate the money multiplier.7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% LL 2.0% 1.5% 1.0% 0.5% 0.0% $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140 $150 $160 Bank Excess Reserves ($Billion) The model of the federal funds market that we have learned is sometimes called the corridor model. This is because, in this model the equilibrium fed funds rate fluctuates between the discount rate and the interest on reserves. This gives the Fed a tool to control the fluctuations in the equilibrium fed funds rate. Let's see how. Assume that the supply of federal funds equals $70 billion. Suppose that currently the discount rate is 4.5 percent and the interest on reserves equals 1.5 percent. In this case, if demand for reserves increases by $40 billion dollars, the equilibrium fed funds rate will increase to percent, and if it decreases by $40 billion, the equilibrium fed funds rate will decrease to percent. Now suppose the Fed wants to reduce the fluctuations in the equilibrium fed funds rate. So it…7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% LL 2.0% 1.5% 1.0% 0.5% 0.0% $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140 $150 $160 Bank Excess Reserves ($Billion) Consider the above graph that shows demand for excess reserves by the banking system as a whole. The discount rate is 4.5 percent and the Fed pays an interest of 1.50 percent on excess reserves. Currently banks as a whole are holding an excess reserve of $70 billion. This means that the equilibrium fed funds rate is 0.03 percent. Suppose that demand for excess reserves by the banking system increases by $20 billion (banks collectively want to hold $20 billion more excess reserves). In that case, the equilibrium fed funds rate will increase to 0.02 percent. Suppose that demand for excess reserves by the banking system increases by another $20 billion (now demand has increased by a total of $40 billion). In that case, the equilibrium fed funds rate will increase to 0.01 percent. Federal Funds Rate
- The following financial statement is for the current year. From the past, you know that 10% of fixed-rate mortgages prepay each year. You also estimate that 10% of checkable deposits and 20% of savings accounts are rate sensitive. Second National Bank Assets Liabilities Reserves $ 1,500,000 Checkable Deposits $ 15,000,000 Securities Money Market Deposits $ 5,500,000 1 Year $ 6,000,000 Savings Accounts $ 8,000,000 1 to 2 Years $ 8,000,000 CDs 2 years $ 12,000,000 Variables-rate $ 15,000,000 Residential Mortgages 1 Year $ 22,000,000 Variables-rate $ 7,000,000 1 to 2 Years $ 5,000,000 Fixed-rate $ 13,000,000 2 years $ 2,500,000 Commercial Loans Fed Funds $ 5,000,000 1 Year $ 1,500,000 Borrowings 1 to 2 Years $ 18,500,000 1 Year $ 12,000,000 2 years $ 30,000,000 1 to 2 Years $ 3,000,000 Buildings, etc. $ 2,500,000 2 years $ 2,000,000 Bank Capital $ 5,000,000 Total $100,000,000 Total $100,000,000 (a) What is the current Income GAP for Second National Bank? (b) What will…If the face value of a 91-day Treasury Bill is £100000 and it is issued at a discount of £500, what is the annual interest rate (yield) that the purchaser receives (expressed as a percentage to 2 decimal places)? Answer the question by providing the appropriate number including decimal point in the box below (e.g. 1.23). Do not enter a comma, space, letters, words or symbols (such as %). Failure to follow these instructions will result in your answer being marked as incorrect. ( Previous page Next page > University PHILIPSFirst National Bank Assets Liabilities Rate-sensitive $80 million $50 million Fixed-rate $20 million $50 million According to the above balance sheet, if interest rates rise by 5 percentage points, say, from 10 to 15%, bank profits (measured using gap analysis) will Question 43 options: A) decline by $0.5 million. B) increase by $1.5 million. C) decline by $2.5 million. D) decline by $1.5 million.
- Round Deposits Required Reserves of 20% Excess Reserves New Loans None of loan proceeds are held as currency in circulation by people Loan proceeds redeposited 1 $500 $100 $400 $400 0 $400 2 $400 $80 $320 $320 0 $320 3 $320 $64 $256 $256 0 $256 4 $256 $51.20 $204.80 $204.80 0 $204.80 5 $204.80 $40.96 $163.84 $163.84 0 $163.84 6 $163.84 $32.77 $131.07 $131.07 0 $131.07 7 $131.07 $26.21 $104.86 $104.86 0 $104.86 8 $104.86 $20.97 $83.89 $83.89 0 $83.89 9 $83.89 $16.78 $67.11 $67.11 0 $67.11 10 $67.11 $13.42 $53.69 $53.69 0 $53.69 Totals $2231.57 $417.31 $1785.26 $1785.26 0 $1785.26 Calculate the new money supply. (Enter response here.) Calculate the money multiplier.31) The FDIC must take steps to close down banks whose equity capital is less than ________ of assets. A) 4% B) 3% C) 2% D) 1% 32) Off-balance-sheet activities A) generate fee income with no increase in risk. B) increase bank risk but do not increase income. C) generate fee income but increase a bank's risk. D) generate fee income and reduce risk. 33) The Basel Accord, an international agreement, requires banks to hold capital based on A) risk-weighted assets. B) the total value of assets. C) liabilities. D) deposits. 34) The Basel Accord requires banks to hold as capital an amount that is at least ________ of their risk-weighted assets. A) 10% B) 8% C) 5% D) 3% 35) Under the Basel Accord, assets and off-balance sheet activities were sorted according to ________ categories with each category assigned a different weight to reflect the amount of ________. A) 2; adverse selection B) 2; credit risk C) 4; adverse selection D)…a.) What is the approximate annualized yield on a 6-month Treasury bill with a face value of $1000 that is sold at $970 in the primary market?
- Identify the term being referred to: A long term loan obtained from a bank and is secured by fixed assets of the debtor firm.Modified duration . represents the 9% impact – expressed as a number, not as a decimal – on price given a 19% change in yield. · represents the weighted average term to maturity – expressed in years - of a bond's cash fiows. represents the S impact on a bond's price of a 100-basis point change in interest rates. is useful for quantifying a bond's credit risk.Deposits equal Balance Sheet ASSETS Reserves (Required) $ 50,000 Loans Reserve Ratio $30,000. $250,000. $300,000. TABLE 1 $500,000. 10% LIABILITIES Deposits