The economic insolvency of many thrift institutions during the 1980s was due, at least in part,...

The economic insolvency of many thrift institutions during the 1980s was due, at least in part, to unexpected increases in interest rates.

True False

The repricing model is a simplistic approach to focusing on the exposure of net interest income to changes in market levels of interest rates for given maturity periods.

True

False

Solutions

Expert Solution

Answer 1 ) True

Reason :- in 1980s due to unexpected increase in interest rate and decrease in asset quality there is massive loss to throughout the saving and loan industry .Most thrifts in financial straits suffered losses due to this unanticipated increase in interest rates .

Answer 2 ) True

Reason :- The repricing model is a simplistic approach to focusing on the exposure of net interest income to changes in market levels of interest rates for given maturity periods. A positive repricing gap implies that a decrease in interest rates will cause interest expense to decrease more than the decrease in interest income.

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

The chapter notes that the rise in the U.S. trade deficit during the 1980s was due...

The chapter notes that the rise in the U.S. trade deficit during the 1980s was due largely to the rise in the U.S. budget deficit. On the other hand, some in the popular press have claimed that the increased trade deficit resulted from a decline in the quality of U.S. products relative to foreign products. Assume that U.S. products did decline in relative quality during the 1980s. 1. This caused net exports at any given exchange rate to (decrease or...

The Australian trade deficit during the 1980s was due largely to the rise in the Australian...

The Australian trade deficit during the 1980s was due largely to the rise in the Australian budget deficit. On the other hand, the popular press sometimes claims that the increased trade deficit resulted from a decline in the quality of Australian products relative to foreign products. a). Assume that Australian products did decline in relative quality during the 1980s. How did this affect net exports at any given exchange rate? b). Use a three-panel diagram to show the effect of...

During the late 1970s and the first part of the 1980s, the Fed seemed to react...

During the late 1970s and the first part of the 1980s, the Fed seemed to react in a counterintuitive manner to the 1970s oil shocks. Explain the reasoning behind the Fed's policy decisions and the effect that they had on the economy?

Why did so many countries in Sub-Saharan Africa experience economic stagnation in the 1980s and 1990s?...

Why did so many countries in Sub-Saharan Africa experience economic stagnation in the 1980s and 1990s? Is there any evidence of recovery in the last decade? Illustrate your answer with reference to literature and data relating to one or more Sub-Saharan African economy.

The chapter notes that the rise in the U.S. trade deficit during the 1980s was due largely to the rise in the U.S. budget deficit.

The chapter notes that the rise in the U.S. trade deficit during the 1980s was due largely to the rise in the U.S. budget deficit. On the other hand, some in the popular press have claimed that the increased trade deficit resulted from decline in the quality of U.S. products relative to foreign products. Assume that U.S. products did decline in relative quality during the 1980s. This caused net exports at any given exchange rate to_______. Indicate the effect of this shift in...

WHAT ARE GOOD ECONOMIC INSTITUTIONS AND WHY DO MANY DEVELOPING COUNTRIES LACK THEM AND WHAT CAN...

WHAT ARE GOOD ECONOMIC INSTITUTIONS AND WHY DO MANY DEVELOPING COUNTRIES LACK THEM AND WHAT CAN BE DONE TO GET THEM?

The daily exchange rate for currencies fluctuates on a daily basis due to many economic conditions...

The daily exchange rate for currencies fluctuates on a daily basis due to many economic conditions affecting the business cycle. The exchange rate for a twelve month period in the year 2004 between the US dollar and the EURO shows an approximately normally distributed behavior with a mean exchange rate of 0.804 euros for every dollar and a standard deviation of 0.0255. Find the following: A) The probability that the exchange rate between the pair of currencies between 0.798 and...

With the economic uncertainty and job insecurity due to the COVID-19 crisis, many consumers may increase...

With the economic uncertainty and job insecurity due to the COVID-19 crisis, many consumers may increase their saving as a precautionary measure. Explain in detail the predicted long-run impact of an increase in national saving on the domestic interest rate, net capital outflow, supply and demand of domestic currency and exchange rate in a large open economy, holding other factors constant. Explain your answer clearly in words. Do not provide diagrams. (125 words maximum)

Many corporations finance at least a part of their operations and asset purchases using debt, principally...

Many corporations finance at least a part of their operations and asset purchases using debt, principally because the cost of debt financing is cheaper than equity financing. Moreover, some firms are able to use leverage more effectively than others-that is, the returns to shareholders as a result of financing with debt are higher for some firms than for other firms. Using the ROE model, discuss when the use of financial leverage is most effective and least effective. When should a...

“The stock price of your manufacturing engineering company has suffered due to the economic downturn during...

“The stock price of your manufacturing engineering company has suffered due to the economic downturn during the COVID-19 pandemic. A focus at the company may be to encourage both current and prospective shareholders. Explain 4 ways that the company could deploy company-wide excess capital to directly incentivise these investors.” Identify and explain different options to incentivise investors.

Subjects