Question:Please give me detailed solution with calculations

The following Information relates to Questions 31 and 32

ABC Bank has a simple balance sheet as below;

Rate-sensitive Assets of $40 million and liabilities of $50 million

Fixed - rate Assets of $60 million and Liabilities of $50 million

31.If interest rates rise by 5%, then bank profits (measured using basic gap analysis) will

____

A)Decline by $0.5 million

B)Decline by $1.5 million

C)Decline by $2.0 million

D)Decline by $2.5 million

Hint:NII_t= (IS Gap_t) R

32.Assume that the average duration of the bank's assets is 4 years, while the average duration of its liabilities is 3 years.Suddenly, there is a 5% up in interest.Such a shock to interest rates will cause the net worth of the bank to ____ by ____ of the total original asset value.

____

A)Decline; 5%

B)Decline; 10%

C)Decline; 15%

D)Increase; 20%

(The following information relates to Questions 34 and 35)

You buy $10 million, 5% coupon, 3-year bonds issued by ABC Co.Over the life of the bond, changes in the ABC's creditworthiness cast doubt on its payment promise.To protect against the falling value in your bonds, you enter into a credit default swap (CDS) with XYZ Insurance.

34.The size of the protection payment is 1.09% for every six month.How much premium do you pay for each year?

____

A)$109,000

B)$152,000

C)$218,000

D)$327,000

35.Unfortunately, ABC goes bankrupt before the CDS ends.Luckily enough, the recovery value on the bonds is 45%.How much does XYZ have to compensate you?

____

A)$4,500,000

B)$5,500,000

C)$9,673,000

D)$10,000,000

(The following information relates to Questions 27 to 29)

An insolvent bank has liabilities worth $100 million and assets valued at only $50 million.Among the liabilities, $75 million are insured deposits and $25 million are uninsured.To be fair, uninsured depositors and CDIC share pro-rata the asset claims.

27.What is the CDICs loss if the payout and closure method of failure is used?

____

A)$15.5 million

B)$25.0 million

C)$37.5 million

D)$50.0 million

28.What is the maximum loss to CDIC if an open assistance is made?Assume that the arrangement costs CDIC $2 million a year while the failed bank will not be kept for more than 3 years.For simplicity, ignore the time value.

____

A)$2.67 million

B)$4.16 million

C)$6.00 million

D)All of the above

29.With the risk-based pricing scheme, if this trouble bank pays a deposit insurance premium of $105,000, what is the appropriate charge?

____

A)3.5 per $100

B)7.0 per $100

C)14.0 per $100

D)28.0 per $100

12.How much is the value of a start-up for which the entrepreneur puts in $2 million and a venture capitalist invests $6 million of seed money owning 60% interest in the firm?

____

A)$6 million

B)$8 million

C)$10 million

D)$12 million

13.Which of the following reason may explain why entrepreneurs donate their personal funds to start a new business?

____

A)The contribution serves as a signal to venture capitals

B)The contribution provides incentive to expend efforts

C)The contribution retains a portion of the firms equity

D)All of the above

14.One of the primary reasons for organizing venture-capital firms as closed-end mutual funds is

____

A)To reduce tax liabilities

B)To take advantage of centralization

C)To provide stability

D)To increase the importance of the limited partners

15.In return for providing funds for buyouts, venture capitals receive

____

A)Long-term bonds of the firm

B)Short-term bonds of the firm

C)An equity position in the firm

D)Ownership of the entire firm

1.An individual invests $6,000 in a load mutual fund with a net asset value (NAV) of $18 and an offering price of $20.During the year, this investor receives a capital gain distribution of $1.20 per share and a dividend of $0.60 per share and sells the shares at a NAV of $22.Calculate the holding period return.

____

A)13.00%

B)19.00%

C)25.56%

D)32.22%

2.Which of the following fund would offer the investor the least risk of capital loss?

____

A)Fixed income funds

B)Equity funds

C)Balanced funds

D)Money market funds

3.The arbitrage activities of hedge funds seek to

_____

A)Capitalize on capital market inefficiencies

B)Estimate what stocks will appreciate in the near future

C)Make significant gains from underwriting securities

D)Estimate the future price of derivative securities

4.No-load mutual funds compensate investment mangers and salespeople by

_____

A)Charging a fee based on the performance of the fund

B)Charging a small fee for each purchase or sale

C)Charging a fee based on the value of the funds asset

D)Charging brokers a fee to sell the shares

5.Exchange-trade-funds (ETFs) provide investors with

____

A)A direct stock market investment with low management expense ratios (MERs)

B)A diversified portfolio representing a proportionate interest in the basket of stocks that make up the underlying index

C)A liquid investment that trades throughout the day

D)All of the above

6.A mutual fund has stocks of three companies: 200 shares of RIM currently valued at $50, 100 shares of Ballard currently valued at $20, and 100 shares of Talisman Energy currently valued at $30.Annual operating expenses are $2,500.Management fees for the year are $4,000.The fund has 500 shares outstanding.What is the net asset value (NAV) of this fund?

____

A)$12

B)$17

C)$25

D)$30

7.What can be said if a mutual fund trades at a discount?

____

A)It means that investors in the fund value their investments at more than the net asset values owned by the fund

B)It means that the mutual fund is increasing in value

C)It means that the value of the mutual fund on the mutual market is less than the net value of the assets in the fund

D)It means that the mutual fund has restrictions in investment

8.Ford Credit (Canada) is an example of

____

A)Captive finance company

B)Business credit institution

C)Floor plan finance company

D)Personal credit institution

9.Which of the following is true regarding disadvantages of a finance company compared with a bank in providing services to small businesses?

____

A)Finance companies are less capable of diversifying risk than are banks

B)Finance companies often have substantial industry and product expertise than do banks

C)Finance companies cannot accept deposits and therefore do not need to deal with bank-type regulatory restrictions

D)Finance companies generally have lower overhead than do banks

10.Finance companies

____

A)Are relatively unregulated

B)Borrow in large amounts, but lend in small amounts

C)Have market niche advantages

D)All of the above

21.Examples of off-balance-sheet activities for banks include

____

A)Trading in financial futures

B)Loan sales

C)Issuing letters of credit

D)All of the above