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Assume a US bank has a small portfolio of Japanese yen what sort of exchange rate movement would the bank be most concerned about? 2. What are the primary responsibilities of the Federal Open Market Committee? 3. Of the major tools of monetary policy which is used most often and why? 4. What is a primary risk of trading with Fed Funds? How was this risk in play during the crisis of 2008 - 2009?

5. What are the major sources and uses of funds for US commercial banks? Where do these appear on the balance sheets of commercial banks and of what significance are they? 6. Think about the principal assets of commercial banks, what are these? What does this asset structure inform us about the risk impacting a commercial bank? 7. What does a commercial banks' CAMELS rating of '2' imply? What if it were '4'? 8. What if a commercial banks asset utilization ratio were to increase, if other balance sheet items remain constant what, what will happen to return on equity (ROE)? 9. Commercial banks are subject to overlapping layers of regulation and authority, and what are the forms of protection and regulations that are imposed on CB's to ensure their customer safety and soundness? 10.In the US there is the phenomenon of shadow banking. What is this, how does it differ from traditional commercial banking and are there any special risks associated with its use? 11.Please describe some of the reasons for the saving and loan crisis of the 1980's? What does that episode tell us about the regulation of financial institutions in the 21st Century? Do you think that we, as a financial system, learned anything from this earlier crisis? 12.What is the relative size of the credit union industry to commercial banking and of what significance is this? What functions doe CU's perform which banks do not? [2:25 PM, 10/26/2021] Fridah: Consider the following arbitrage-free market

S0 =(1,c),D= [ 1 1 1

140 110 80]

D is a matrix that I've tried to show.

(a) (5 points) How many are the primary assets of the market and how many are the states of the world?Is the market complete?

(b) (6 points) If C0 = 70/3 and P0 = 10/3 are arbitrage-free prices for a call and a put 33

option with exercise price K = 100 respectively. Find c.

(c) (6 points) If C0 = 50 is an arbitrage-free price for a call option with exercise price

K = 70. Find c.

(d) (8 points) If = 10 is an arbitrage-free price for a contingent claim with payoff X = (15,12,9) at time T. Find c.

X = (15,12,9) at time T. Find c.

1. (5 points) Suppose the cost of making a car is cheapest in Japan. Then Japan should specialize in producing cars.

2. (5 points) In order for an IRA to encourage savings (relative to a regular savings account), the substitution effect of higher interest rates must dominate the income effect.

3. (5 points) An index fund is a portfolio of stocks that tracks a broader index such as the Dow Jones Industrial Average or the S&P 500. Investing in an index fund is better than investing in the stock of an individual company because the index fund always has higher returns.

4. Consider the effect of interest rates on consumption today. Increasing interest rates always has a negative substitution effect (decreases consumption today) and a positive income effect (increases consumption.

Consider an overlapping generations model in which individuals live for two periods. Assume that the population grows at rate n > 1 each period. Each individual is endowed with y units of the single consumption good when young, y units when old, where < 1 is sufficiently low that individuals want to consume more than their endowment in the second period. The consumption good is non-storable. The supply of valued fiat money M0 is fixed (introduced as a gift to the initial old). (a) (8 marks) Write down the feasibility constraint that a central planner would face. Consider the set of stationary allocations. Show where the golden rule allocation is on a graph. (b) (12 marks) Write down an individual's first and second period budget constraints. Derive the individual's lifetime budget constraint. Solve for a stationary monetary equilibrium. Does the stationary monetary equilibrium obey the golden rule? (c) (10 marks) If the government where to triple the stock of money it gave to the initial old in the first period, would the stationary monetary equilibrium obey the golden rule? Briefly explain.

Let X=(1,2....6. )Suppose R is a relation from X to R given by: R={(x, y):x^2-3=y}

a) Determine the domain of this relation.

(b) Determine the range of this relation.

(c) Is R a function? Why or why not?

(d) Is R an injection? Why or why not?

(e) Is R a surjection? Why or why not?

(f) Is R^-1 a function? Why or why not?