Question 11 of 11 4 Points Current market rates are 4 %. Calculate the modified duration of a 10-year, zero coupon bond. PART 2: MULTIPLE CHOICE Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 4 Points Question 10 of 11 Market rates are 5 percent per year. What is the duration of a Consol bond (a perpetuity bond)? Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 6 Points Question 9 of 11 There has been discussion of breaking up the biggest banks. Whatever the merits of such a policy, how might it disadvantage: a) depositors and b) bank borrowers? Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 4 Points Jestion 10 of 11 6 Points Question 8 of 11 Explain what are the two disadvantages of banks making floating, rather than fixed, rate long-term loans? Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 4 Points Question 7 of 11 Banks often make long-term loans at a floating, rather than a fixed, rate. Explain what is the advantage to banks? Maximum number of characters including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 6 Points Question 6 of 11 6 Points and if Two banks wish to merge. The Department of Justice would be inclined not to allow the merger if prior to the merger the HHI of the market were to be after the merger, the HHI area rose by more than Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 6 Points Question 5 of 11 In a market area, there are five equally-sized banks two of which wish to merge. Calculate the Herfindahl-Hirschman Index (HHI). Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) I 5 Points Question 4 of 11 A bank with $3000 in assets has a duration gap of 2.0 years. What would be the impact on its equity capital from a rise in interest rates from 4% to 5? Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) I 6 Points 7 Points Question 3 of 11 A 2-year corporate note with a face value of $1,000 is currently paying 10% interest annually. The current market rate is 12%. What is its approximate duration? Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 5 Points Question 4 of 11 Part 1 of 2 - Short Answers and Problems Question 1 of 11 4 Points A 3-year, zero coupon bond has a price of $1,000 and market rates are 8%. Assume rates fall by 1%. Using the duration formula, what would be the dollar change in the bond price? Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 4 Points Question 2 of 11 muihinnital of $109. What would be the be 4 Points Question 2 of 11 Big Bank has $1000 in assets with a duration of 7 years, and $900 of liabilities with a duration of 2 years. It also has equity capital of $100. What would be the bank's duration gap? Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 7 Points Question 3 of 11 Question 11 of 11 4 Points Current market rates are 4 %. Calculate the modified duration of a 10-year, zero coupon bond. PART 2: MULTIPLE CHOICE Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 4 Points Question 10 of 11 Market rates are 5 percent per year. What is the duration of a Consol bond (a perpetuity bond)? Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 6 Points Question 9 of 11 There has been discussion of breaking up the biggest banks. Whatever the merits of such a policy, how might it disadvantage: a) depositors and b) bank borrowers? Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 4 Points Jestion 10 of 11 6 Points Question 8 of 11 Explain what are the two disadvantages of banks making floating, rather than fixed, rate long-term loans? Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 4 Points Question 7 of 11 Banks often make long-term loans at a floating, rather than a fixed, rate. Explain what is the advantage to banks? Maximum number of characters including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 6 Points Question 6 of 11 6 Points and if Two banks wish to merge. The Department of Justice would be inclined not to allow the merger if prior to the merger the HHI of the market were to be after the merger, the HHI area rose by more than Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 6 Points Question 5 of 11 In a market area, there are five equally-sized banks two of which wish to merge. Calculate the Herfindahl-Hirschman Index (HHI). Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) I 5 Points Question 4 of 11 A bank with $3000 in assets has a duration gap of 2.0 years. What would be the impact on its equity capital from a rise in interest rates from 4% to 5? Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) I 6 Points 7 Points Question 3 of 11 A 2-year corporate note with a face value of $1,000 is currently paying 10% interest annually. The current market rate is 12%. What is its approximate duration? Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 5 Points Question 4 of 11 Part 1 of 2 - Short Answers and Problems Question 1 of 11 4 Points A 3-year, zero coupon bond has a price of $1,000 and market rates are 8%. Assume rates fall by 1%. Using the duration formula, what would be the dollar change in the bond price? Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 4 Points Question 2 of 11 muihinnital of $109. What would be the be 4 Points Question 2 of 11 Big Bank has $1000 in assets with a duration of 7 years, and $900 of liabilities with a duration of 2 years. It also has equity capital of $100. What would be the bank's duration gap? Maximum number of characters (including HTML tags added by text editor): 32,000 Show Rich-Text Editor (and character count) 7 Points Question 3 of 11