金融市場與金融機(jī)構(gòu)基礎(chǔ)(第3章)英文版答案

1、文檔從網(wǎng)絡(luò)中收集，已重新整理排版.word版本可編輯歡迎下載支持.ANSWERS TO QUESTIONS FOR CHAPTER 3(Questions are in bold print followed by answers.)1. Explain the ways in which a depository institution can accommodate withdrawal and loan demand.A depository institution can accommodate loan and withdrawal demands first by having s

2、ufficient cash on hand In addition it can attract more deposits, borrow from the Fed or other banks, and liquidate some of its other assets.2. Why do you think a debt instrument whose interest rate is changed periodically based on some market interest rate would be more suitable for a depository ins

3、titution than a long term debt instrument with a fixed interest rate?This question refers to asset-liability management by a depository institution. An adjustable rate can eliminate or minimize the mismatch of maturity risk. As interest rates rise, the institution would have to pay more for deposits

4、, but would also receive higher payments from its loan.3. What is meant by:a. individual bankingb. institutional bankingc. global bankinga. Individual banking is retail or consumer banking Such a bank emphasizes individual deposits, consumer loans and personal financial trust services.b. An institut

5、ional bank caters more to commercial, industrial and government customers It issues deposits to them and tries to meet their loan needs.c. A global bank encompasses many financial services for bo什domestic and foreign customers. It is much involved in foreign exchange trading as well as the financial

6、 of international trade and investment.4.a. What is the Basel Committee for Bank Supervision?b. What do the two frameworks, Basel I and Basel II，published by the Basel Committee for Bank Supenision, address regarding banking?a. It is the organization that plays the primary role in establishing risk

7、and management guidelines for banks throughout the worldb. The frameworks set forth minimum capital requirements and standards4. Explain each of the following:a. reserve ratiob. required reservesa. The reserve ratio is the percentage of deposits a bank must keep in a non-interest-bearing account at

8、the Fed.b. Required reserves are the actual dollar amounts based on a given reserve ratio.5. Explain each of the following types of deposit accounts:a. demand depositb. certificate of depositc. money market demand accounta. Demand deposits (checking accounts) do not pay interest and can be withdrawn

9、 at any time (upon demand).b. Certificates of Deposit (CDs) are time deposits which pay a fixed or variable rate of interest over a specified term to maturity They cannot be withdrawn prior to maturity without a substantial penalty. negotiable CDs (large business deposits) can be traded so that the

10、original owner still obtains liquidity when neededc. Money Market Demand Accounts (MMDAs) are basically demand or checking accounts that pay interest. Minimum amounts must be maintained in these accounts so that at least a 7-day interest can be paid. Since many persons find it not possible to mainta

11、in this minimum (usually around $2500) there are still plenty of takers for the non-interest-bearing demand deposits 1. How did the Glass-Steagall Act impact the operations of a bank?The Glass-Steagall Act prohibited banks from carrying out certain activities in the securities markets, which are pri

12、ncipal investment banking activities. It also prohibited banks from engaging in insurance activities.6格式已調(diào)整，word版本可編輯.8. The following is the book value of the assets of a bank:AssetBook Value (in millions)U.S. Treasury securities Municipal general obligation bondsResidential mortgages Commercial lo

13、ans Total book value$5050400200$700a. Calculate the credit risk-weighted assets using the following information:AssetRisk WeightU.S. Treasury securities0%Municipal general obligationbondsResidential mortgages50Commercial Ioans100b. What is the minimum core capital requirement? c What is the minimum

14、total capital requirement?BVWeightProductUS T Sec.$500%0MB5020%10RM40050%200CL200100%200Total700410a. The risk weighted assets would be $410b. The minimum core capital is $28 million (.04X700) i.e., 4% of book value.c. Minimum total capital (core plus supplementary capital) is 32.8 million, .08X410,

15、 which is 8% of the risk-weighted assets.9. In later chapters, we will discuss a measure called cluration. Duration is a measure of the sensitivity of an asset or a liability to a change in interest rates. Why would bank management want to know the duration of its assets and liabilities?a. Duration

16、is a measure of the approximate change in the value of an asset for a 1% change in interest rates.b. If an asset has a duration of 5, then the portfolios value will change by approximately 5% if interest rate changes by 100 basis points.10.a. Explain how bank regulators have incorporated Interest ri

17、sk into capital requirements.b. Explain how S&L regulators have Incorporated interest rate risk into capital requirements.a. The FDIC Improvement Act of 1991, required regulators of DI to incorporate interest rate risk into capital requirements. It is based on measuring interest rate sensitivity of

18、the assets and liabilities of the bankb The OST adopted a regulation that incorporates interest rate risk for S&L. It specifies that if thrift has greater interest rate risk exposure, there would be a deduction of its risk-based capital. The risk is specified as a decline in net profit value as a re

19、sult of 2% change in market interest rate.IL When the manager of a bank9s portfolio of securities considers alternative investments she is also concerned about the risk weight assigned to the security. Why?The Basel guidelines give weight to the credit risk of various instruments. These weights are

20、0%, 20%, 50% and 100%. The book value of the asset is multiplied by the credit risk weights to determine the amount of core and supplementary capital that the bank will need to support that asset.12. You and a friend are discussing the savings and loan cnsis. She states that the whole mess started i

21、n the early 1980s.When short-term rates skyrocketed, S&Ls got killed一their spread income went from positive to negative. They were borrowing short and lending long.”a. What does she mean by borrowing short and lending long?b. Are higher or lower interest rates beneficial to an institution that borro

22、ws short and lends long?a. In this context, borrowing short and lending long refers to the balance sheet structure of S&Ls. Their sources of funds (liabilities) are short-term (mainly deposits) and their uses (assets) are long-term in nature (e.g. residential mortgages)b. Since long-term rates tend

23、to be higher than short-term ones, stable interest rates would be the best situation. However, rising interest rates would increase the cost of funds for S&Ls without fully compensating higher returns on assets. Hence a decline in interest rate spread or margin Thus lower rates, having an opposite e

24、ffect, would be more beneficial.13. Consider this headline from the New York Times of March 26,1933: Bankers will fight Deposit Guarantees. In this article, it is stated that bankers argue that deposit guarantees will encourage bad banking. Explain why.The barrier imposed by Glass-Steagall act was f

25、inally destroyed by the Gramm-Leach Bliley Act of 1999. This act modified parts of the BHC Act so as to permit affiliations between banks and insurance underwriters It created a new financial holding company, which is authorized to engage in underwriting and selling securities The act preserved the

26、right of state to regulate insurance activities, but prohibits state actions that have would adversely affected bank-affiliated firms from selling insurance on an equal basis with other insurance agents14. How did the Gramm-Leach-Bliley Act of 1999 expand the activities permitted by banks?a. Deposit

27、 insurance provides a safety net and can thus make depositors indifferent to the soundness of the depository recipients of their funds. With depositors exercising little discipline through the cost of deposits, the incentive of some banks owners to control risktaking accrue to the owners. It becomes

28、 a ulieads I win, tails you losev situationb One the positive side, deposit insurance provides a comfort to depositors and thus attracts depositors to financial institutions. But such insurance carries a moral hazard, it can be costly and, unless premiums are risk-based, it forces the very sound ban

29、ks to subsidize the very risky ones15 The following quotation is from the October 29, 1990 issue of Corporate Financing Week：Chase Manhattan Bank is preparing its first asset-backed debt issue, becoming the last major consumer bank to plan to access the growing market, Street asset backed officialsS

30、aid.Asset-backed offerings enable banks to remove credit card or other loan receivables from their balance sheets, which helps them comply with capital requirements.a. What capital requirements is this article referring to?b. Explain why asset securitization reduces capital requirements.a. The capital requirements mentioned are risk based capital as specified under the Basel Agreement, which forces banks to hold minimum amounts of equity against risk-based assets.b Securitization effectively eliminates high risk based loans from the balance sheet. The capital requirements in the