Question

In: Finance

First Citiwide Change Bank has made $10 million in loan commitments, and wants to have a...

First Citiwide Change Bank has made $10 million in loan commitments, and wants to have a plan to deal with this issue.   Why is this a source of risk? If you knew First Citiwide had a large amount of core deposits, would this suggest leaning towards stored liquidity or purchased liquidity to deal with this risk? Explain

Solutions

Expert Solution

jeff jeffy answered 5 months ago
Next > < Previous

Related Solutions

A bank has made a 1-year loan at 4%. To fund the loan, it issued a...
A bank has made a 1-year loan at 4%. To fund the loan, it issued a 6-month deposit at 2.5%. It also purchased a 6x12 FRA at 3%. On the settlement date of the contract, 6-month LIBOR is 5%, and the bank issues a 6-month deposit at LIBOR. What is the bank’s interest margin (spread), in %, for the first six months and for the next? 1.5% and 1.5% 1.5% and 1% 1.5% and −1% 1% and −1% 1% and...
A company wants a $3 million loan for a warehouse expansion. The bank will finance 100%...
A company wants a $3 million loan for a warehouse expansion. The bank will finance 100% of the project with a 5 year balloon and a 20 year amortization. Give a loan structure for both a 5.00% and 5.25% fixed rate. (Specifically, I am looking for help concerning the 5 year balloon)
A small micro-loan bank has 1000 loan customers. If the total annual loan repayments made by...
A small micro-loan bank has 1000 loan customers. If the total annual loan repayments made by an individual is a random variable with mean $850 and standard deviation $900, approximate the probability that the average total annual repayments made across all customers is greater than $865.
You’re a bank having made a loan of $250 million. The borrower pays 3-month LIBOR +...
You’re a bank having made a loan of $250 million. The borrower pays 3-month LIBOR + 1.5%. The loan began two months ago, so the next re-pricing (interest rate setting) date is in one month. What is your risk, and how could you hedge? a) Your risk is that LIBOR will increase within a month; you can hedge by entering into a 1x4 FRA as a “lender” of $250 million. b) Your risk is that LIBOR will increase within a...
Bank 1 has assets composed solely of a 10-year, 12.50 percent coupon, $2.4 million loan with...
Bank 1 has assets composed solely of a 10-year, 12.50 percent coupon, $2.4 million loan with a 12.50 percent yield to maturity. It is financed with a 10-year, 10 percent coupon, $2.4 million CD with a 10 percent yield to maturity. Bank 2 has assets composed solely of a 7-year, 12.50 percent, zero-coupon bond with a current value of $2,068,193.38 and a maturity value of $4,716,923.15. It is financed by a 10-year, 7.75 percent coupon, $2,400,000 face value CD with...
A loan of $50,000 is made today. This loan will be repaid by a first smaller...
A loan of $50,000 is made today. This loan will be repaid by a first smaller repayment, followed by 15 level repayments, i.e., there are 16 repayments in total. The first smaller repayment will occur exactly 3 years from today and each subsequent repayment (starting from the first level repayment) will occur exactly 1 year after the previous repayment. Explicitly, the final repayment will occur exactly 18 years from today. If the interest being charged on this loan is 4.8%...
You are the employed by the First National Bank. This bank has $5 million in capital....
You are the employed by the First National Bank. This bank has $5 million in capital. They have $100 in checkable deposits. Of that they keep only the 10% required reserves and loan the rest out. In $45 million in business loans and $50 million in residential mortgages. How well capitalized is First National Bank? Calculate the risk weighted level of assets and risk weighted leverage ratio. Why are leverage (capital) ratios important for financial regulators and institutions?
You are the employed by the First National Bank. This bank has $5 million in capital....
You are the employed by the First National Bank. This bank has $5 million in capital. They have $100 in checkable deposits. Of that they keep only the 10% required reserves and loan the rest out. In $45 million in business loans and $50 million in residential mortgages. How well capitalized is First National Bank? Calculate the risk weighted level of assets and risk weighted leverage ratio. Why are leverage (capital) ratios important for financial regulators and institutions?
Assume that a bank has $12 million in reserves and checkable deposits of $10 million and...
Assume that a bank has $12 million in reserves and checkable deposits of $10 million and the required reserve ratio is 10%. The maximum amount of loans this bank can make is-
You are a loan officer for First Benevolent Bank. You have an uneasy feeling as you...
You are a loan officer for First Benevolent Bank. You have an uneasy feeling as you examine a loan application from Daring Corporation. The application included the following financial statements. DARING CORPORATION Income Statement   For the Year Ended December 31, 2018     Sales revenue $100,000 Cost of goods sold (50,000) Depreciation expense (5,000) Remaining expenses   (25,000)    Net income $ 20,000 DARING CORPORATION Balance Sheet December 31, 2018 Cash $ 5,000 Accounts receivable 25,000 Inventory 20,000 Operational assets 55,000 Accumulated depreciation...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT