FIN 3005 FIN3005 Week 9 Individual Work 1 (Everest University)
FIN3005 Week 9 Individual Work 1 (Everest University)
QUESTIONS AND APPLICATIONS (Chapter 19)
1. Integrating Asset and Liability Management: What is accomplished when a bank integrates its liability management with its asset management?
2. Liquidity: Given the liquidity advantage of holding Treasury bills, why do banks hold only a relatively small portion of their assets as T-bills?
3. Illiquidity: How do banks resolve illiquidity problems?
4. Managing Interest Rate Risk: If a bank expects interest rates to decrease over time, how might it alter the rate sensitivity of its assets and liabilities?
5. Rate Sensitivity: List some rate-sensitive assets and some rate-insensitive assets of banks.
8. Managing Interest Rate Risk: Assume that a bank expects to attract most of its funds through short-term CDs and would prefer to use most of its funds to provide long-term loans. How could it follow this strategy and still reduce interest rate risk?
13. Bank Management Dilemma: Can a bank simultaneously maximize return and minimize default risk? If not, what can it do instead?
15. Bank Loan Diversification: In what two ways should a bank diversify its loans? Why? Is international diversification of loans a viable strategy for dealing with credit risk? Defend your answer.
16. Commercial Borrowing: Do all commercial borrowers receive the same interest rate on loans?
QUESTIONS AND APPLICATIONS (Chapter 20)
1. Interest Income: How can gross interest income rise while the net interest margin remains somewhat stable for a particular bank?
2. Impact on Income: If a bank shifts its loan policy to pursue more credit cards loans, how will its net interest margin be affected? If the customers repay their loans, the net interest margin will increase.
3. Noninterest Income: What has been the trend in noninterest income in recent year? Explain.
4. Net Interest Margin: How could a bank generate higher income before tax (as percentage of assets) when its net interest margin has decreased?
5. Net Interest Income: Suppose the net interest income generated by a bank is equal to 1.5 percent of its assets. Based on past experience, would the bank experience a loss or a gain? Explain.
6. Noninterest Income: Why have large money center banks’ noninterest income levels typically been higher than those of smaller banks?
7. Bank Leverage: What does the assets/equity ratio of a bank indicate?
8. Analysis of a Bank’s ROA: What are some of the more common reasons why a bank may experience a low ROA?
9. Loan Loss Provisions: Explain why loan loss provisions of most banks could increase in a particular period.
10. Bank Performance during the Credit Crisis: Why do you think some banks suffered larger losses than other banks during the credit crisis?
11. Weak Performance: What are the likely reasons for weak bank performance?
12. Bank Income Statement Assume that SUNY: Bank plans to liquidate Treasury security holdings and use the proceeds for small business loans. Explain how this strategy will affect the different income statement items. Also identify any income statement items for which the effects of this strategy are more difficult to estimate.