Question
During a period of falling interest rates, a banks net interest margin (GAP) will likely _______ if its liabilities are _________ rate-sensitive than its assets.
During a period of falling interest rates, a banks net interest margin (GAP) will likely _______ if its liabilities are _________ rate-sensitive than its assets.
a. increase; equally b. decrease; equally c. increase; more d. decrease; more
A gap ratio of less than one suggests that:
an increase in interest rates would increase the banks net profitability;
rate-sensitive liabilities exceed rate-sensitive assets;
rate-sensitive assets exceed rate-sensitive liabilities;
an increase in interest rates would increase the banks net interest margin.
Banks could increase their liquid position by restructuring their asset portfolio to contain fewer _________ and more ____________ .
a. loans; treasury securities b. treasury securities; excess reserves
c. treasury securities; loans d. corporate stock holdings; treasury securities.
If the FEDs current intention is to buy the equivalent of most of the new Treasury debt issued, then the FED is following a(n) _______ monetary policy:
a. offensive (action to change the direction of monetary policy)
b. defensive (action to maintain achievement of current goals)
c. precautionary (action in anticipation of market action to prevent profit taking)
d. reactionary (action taken without clear policy intentions stated)
The portfolio of Treasury bonds amassed during 2009 swelled, about doubling; in the 2007 crisis the loan portfolio expanded on the FEDs balance sheet. Which of the following reflects both actions taken by the FED as displayed in its balance sheet and discussed in class:
a. FED increased its security holdings associated with repos, acceptances, foreign securities, and foreign currencies.
b. FED sold Treasuries to add to its Loan portfolio and thereby provided large quantities of liquidity to the system.
c. FED expanded the money supply by expanding either the Loan or the Security Portfolio on its balance sheet.
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