Question

In: Finance

ISGM does not consider the impact of the changes in the interest rates on the following:...

ISGM does not consider the impact of the changes in the interest rates on the following:

Select one:

a. NIM

b. NII

c. Net worth

Solutions

Expert Solution

Answer-

The correct option is c. Net worth

ISGM does not consider the impact of changes in interest rates on Net worth.

The Net Interest Income (NII) and Net Interest Margin (NIM) of banks are dependent on the movements of interest rates. Any mismatches in the cash flows ie. fixed assets or liabilities or repricing dates in case of floating assets or liabilities, will expose the  bank’s NII or NIM and both will vary with changes in interest rates.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

When the Fed changes the interest rates how does it affect the bond market and the...
When the Fed changes the interest rates how does it affect the bond market and the stock market? Do you expect lower or higher interest rates in the near future? Why? Minimum of 500 words.
Consider and describe how interest rates and exchange rates impact foreign direct investment and foreign exchange...
Consider and describe how interest rates and exchange rates impact foreign direct investment and foreign exchange money flows. Comment on PEG, Free Floating System, etc.
Explain the impact on the interest rates of the following bonds in each of the events...
Explain the impact on the interest rates of the following bonds in each of the events using the portfolio preference framework. a. Municipal bonds, when the tax rate falls b. Corporate bonds, when the risk increases c. Government bonds, when the credit rating is downgraded
Which of the following investments is most affected by changes in the level of interest rates?...
Which of the following investments is most affected by changes in the level of interest rates? Suppose interest rates go up or down by 50 basis points(+/- 0.5%). Rank the investments from most affected (largest change in value) to least affected (smallest change in value). (a) $1 million invested in short-term Treasury bills. (b) $1 million invested in STRIPS (zero coupons) maturing in December 2025. (c) $1 million invested in a Treasury note maturing in December 2025. The note pays...
I am having trouble understanding the following: When interest rates are low (decreasing) what impact does...
I am having trouble understanding the following: When interest rates are low (decreasing) what impact does it have on the profitability of commercial banks, finance companies, insurance companies, security firms, and mutual funds? Additionally, what exactly could they do to combat this? Short simple explanations work! Thanks.
Define and describe nominal and real interest rates. What impact do interest rates have on the...
Define and describe nominal and real interest rates. What impact do interest rates have on the cost of financing a purchase? What is the discount formula?
Define and describe nominal and real interest rates. What impact do interest rates have on the...
Define and describe nominal and real interest rates. What impact do interest rates have on the cost of financing a purchase? What is the discount formula.
Which of the following is TRUE concerning the impact of interest rate changes on stock prices?...
Which of the following is TRUE concerning the impact of interest rate changes on stock prices? Group of answer choices As interest rates rise, stock prices rise because companies earn more profits on invested funds. As interest rates rise, stock prices generally are unaffected because companies earn more profits on invested funds but pay lower interest costs on borrowed funds. As interest rates fall, stock prices fall because companies earn lower returns on invested funds. As interest rates fall, stock...
Which of the following does the sensitivity of the bond price to the changes in interest...
Which of the following does the sensitivity of the bond price to the changes in interest rates depend on? Maturity of the bond Coupon rate Both maturity of the bond and the coupon rate None Which of the following is correct when the Coupon Rate of a bond is equal to its Yield to Maturity? The price of this bond is equal to its face value. The price of this bond is higher than its face value. The price of...
Companies A and B face the following interest rates (adjusted for the differential impact of taxes):...
Companies A and B face the following interest rates (adjusted for the differential impact of taxes): A B US dollars (floating rate) LIBOR + 5% LIBOR + 1.0% Canadian dollars (fixed rate) 5.0% 6.5% Assume that A wants to borrow U.S. dollars at a floating rate of interest and B wants to borrow Canadian dollars at a fixed rate of interest. A financial institution is planning to arrange a swap and requires a 50-basis-point spread. If the swap is equally...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT