Question

In: Finance

1. To raise money through a repurchase agreement what does a bank need to have? A....

1. To raise money through a repurchase agreement what does a bank need to have?

A. Marketable securities

B. Adequate equity capital

C. Savings accounts

2. The federal funds market is best described as:

A. a market for U. S. Treasury securities.

B. a market for interbank borrowing and lending.

3. As of Dec 2019 the market cap of Bank of America was:

A. less than the book value of equity.

B. greater than the book value of equity.

Solutions

Expert Solution

Answers-

Q 1)

The correct Option is B. Adequate equity capital
A repurchase agreement is agreement of sale or purchase for securities of fixed income instruments with a commitment to buy back or sell these instruments on a future date for a prespecified price.

The Option A and C  is incorrect.
Option A may be useful when the bank sells securities but is not sufficient.
Option C is incorrect.

Q 2)

The correct Option is B.

The federal funds market is best described as a market for interbank borrowing and lending excess reserves. It is done on an overnight basis.
The Option A is described as the UF Fed reserve which sells and buy U. S Treasury securities.

Q 3)

The correct Option is B. Market cap of Bank of America was greater than the book value of equity.

As of Dec 31st 2019 the Market cap of Bank of America was $ 316.8 billions

The value for 31 st Dec 2019 the Book value of equity was $ 241.41 billions.


Related Solutions

11. What is the difference between a repurchase agreement and a reverse repurchase agreement? 18. Who...
11. What is the difference between a repurchase agreement and a reverse repurchase agreement? 18. Who are the major issuers of and investors in money market securities? 7. You can purchase a T-bill that is 95 days from maturity for $9,965. The T-bill has a face value of $10,000. Calculate the T-bill’s quoted yield. Calculate the T-bill’s bond equivalent yield. Calculate the T-bill’s EAR.
1. Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities...
1. Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from a correspondent bank at a price of $34,950,000, with the promise to buy them back at a price of $35,000,000. a. Calculate the yield on the repo if it has a 5-day maturity. b. Calculate the yield on the repo if it has a 16-day maturity. (For all requirements, use 360 days in a year. Do not round intermediate calculations. Round your answers...
18. The Bank of Canada will engage in a sale and repurchase agreement when it wants...
18. The Bank of Canada will engage in a sale and repurchase agreement when it wants to ________ reserves ________ in the banking system. a. increase; permanently b. decrease; temporarily c. increase; temporarily d. decrease; permanently 19. One problem with the too-big-to-fail policy is that it ________ the incentive for ___________ by banks. a. increases; moral hazard b. decreases; moral hazard c. increases; adverse selection d. decreases; adverse selection 20. Covenants such as those to discourage undesirable behaviour of borrowers...
1. what is a repurchase agreement and what is a reverse repo? how do they function...
1. what is a repurchase agreement and what is a reverse repo? how do they function and how do they differ? what does it represent? who are the main participants of the repo market? please explain clearly max in 6 sentences. 2. what are the lagged effects of the monetary policy. list all of them and explain each of them clearly. please explain each of the lagged effects max in one sentence. 3. what is global crowding out effect? explain...
Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from...
Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from a correspondent bank at a price of $24,995,000, with the promise to buy them back at a price of $25,000,000. a. Calculate the yield on the repo if it has a 7-day maturity. b. Calculate the yield on the repo if it has a 21-day maturity.
1) How does the central bank control the money supply through open market operations? Explain. For...
1) How does the central bank control the money supply through open market operations? Explain. For this question, you need to say what exactly open market operations are and how they affect the monetary base through affecting reserves. You may want to provide one example for this question (eg. an open market purchase or sale). Ideally, to get full marks you would also briefly mention how the monetary base affects the money supply through the money multiplier. You don’t need...
Q. 1 Repo 105 was an accounting loophole for repurchase agreement. Lehman Brothers exploited it in...
Q. 1 Repo 105 was an accounting loophole for repurchase agreement. Lehman Brothers exploited it in an attempt to hide its true amounts of leverage. By using Repo 105, Lehman Brothers would classify a short-term repurchase as sale. Proceeds from the sale are used to pay down debts, thus allowing the company balance sheet to look good. After the financial reports are published; Lehman Brothers would eventually borrow money to repurchase back its same original assets. Based on this, did...
Why does the Money supply need to be controlled?
Why does the Money supply need to be controlled?
2) A bank lends money to a firm on 01/01/2010. According to the lending agreement, the...
2) A bank lends money to a firm on 01/01/2010. According to the lending agreement, the bank will receive the following payments: 06/30/2010 - $2,300,000 12/31/2010 - $1,300,000 06/30/2011 - $5,700,000 12/31/2011 - $3,400,000 06/30/2012 - $360,000 12/31/2012 - $560,000 If the annual interest rate on the loan is 3.80%, how much did the firm borrow?
Suppose that you own and operate a company. You need to raise money to expand your...
Suppose that you own and operate a company. You need to raise money to expand your operation, so you approach a bank for a loan. The loan officer has asked you for your company's financial statements. a. What items on your financial statements would be of the most interest to the loan officer? b. Develop two questions that you think the loan officer would be trying to answer by looking at your financial statements.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT