Repos and fed funds borrowed are examples of purchased liquidity, Group of answer choices True False . Consider the balance sheet for the DI listed below: Assets Liabilities (in millions) 5 25 30 (in millions) 50 10 Cash Securities Loans Deposits Equity The DI is expecting a $10 million net deposit drain. Show the Di's balance sheet when Dl purchases liabilities to offset this expected drain. Group of answer choices 0 Assets Cash Securities Loans in millions) 42 (in millions) 0 22 30 Liabilities Deposits Equity 10 Assets Cash Securities Loans (in millions) 43 (in millions) 0 23 30 Liabilities Deposits Equity 10 in millions) (in millions) Assets Cash 5 Liabilities Deposits 41 Borrowed Funds 9 Equity 10 Securities 25 Loans 30 Assets Liabilities (in millions) Cash Securities Loans (in millions) 5 25 30 Deposits 43 Borrowed funds 7 Equity 10 (in millions) Assets Cash Securities Loans (in millions) 5 25 30 Liabilities Deposits 40 Borrowed Funds 10 Equity 10 Second National Bank (SNB) (million $) S S Funds borrowed Maximum amount SNB can still borrow Cash-type assets Excess cash reserves Federal reserve borrowings S 5,750 9,250 3,700 80 20 $ S What are Second National Bank's net liquidity? Group of answer choices 12.780 $6,270 $7.260 $5.770 $13,030 A financial intermediary has two assets in its investment portfolio. It has 35 percent of its security portfolio invested in one-month Treasury bills and 65 percent in real estate loans. If it liquidated the bills today, the bank would receive $98 per hundred of face value. If the real estate loans were sold today, they would be worth $80 per 100 of face value. In one month, the real estate loans could be liquidated at $95 per 100 of face value. What is the intermediary's one-month liquidity index? Hint: I = P where w;= weights of the portfolio based on the face value of the assets, P = fire-sale price of asset i P:* = anticipated values in one year of asset i Group of answer choices 0.93 0.91 0.90 0.92 0.89 Use the following balance sheet information to answer this question. Duration Amount T-bills 0.5 S 500 T-notes 0.8 S 50 T-bonds 4.5 S 200 Loans 7 S3,000 Deposits 1 $2,750 Federal funds 0.01 S250 Equity S750 If the entire yield curve shifted upward 0.5 percent (i.c., AR/(1 + R)=0.0050), what is the change in the FI's market value of equity? Hint: The duration of a portfolio of assets or liabilities is the market value weighted average of the durations of the component of the portfolio. DGAP = DA - KD where k = L/A = Measure of the FI's leverage (i.e. the amount of borrowed funds or liabilities rather than owner's equity used to fund its asset portfolio.) AMVE = - Leverage adjusted duration gap x Asset Size x Interest Rate Shock In other words, AMVE = -DGAP(A) AR/(1+R) Group of answer choices -29.16 -145.78 -97.19 -174.94 -48.59 Consider a 15-year, 6 percent annual coupon bond with a required return of 4 percent. The bond has a face value of $1,000. Which of the following is correct? Round your calculations/answers to two decimals. I. The price of the bond is 1,222.37. II. If interest rates decline to 3 percent, the price of the bond would be 1,255.91. III. If interest rates decline to 3 percent, the percentage change in price would be 11.11 percent. Group of answer choices C I and II only I, II, and III I only Il only I and III only What is the duration of a two-year bond that pays an annual coupon of 3 percent and has a current yield to maturity of 6 percent? Use $1,000 as the face value. Round your calculations/answers to two decimals. McDUR Pa = (1 + y)PVIFA2 y Hint 1: Step 1. C/P McDUR =n-[n-McDUR][ Step2 Hint 2: McDUR = PV(cash flows weighted by year of receipt) / PV(cash flows) Group of answer choices 1.93 years 1.97 years 1.95 years 1.99 years 1.91 years Consider the following balance sheet for Watchover Savings Inc. (in millions): Assets Liabilitics and Equity $100 $125 Floating-rate mortgages NOW deposits (4%) (8%) $150 $75 30-year lixed-rate loans (7%) 5-year time deposits (5%) Equity $50 Total $250 Total $250 What will be the decline in the net interest income at year-end if interest rates rise by 3 percent? Group of answer choices 0.75 million 0.20 million 0.5 million 0.15 million 0.25 million Imagine that you are managing a trading portfolio worth S60 million. The return on your portfolio is normally distributed with an annual standard deviation of 30% What is the 1-day VAR with 99% confidence? Ilint: VAR (99%)= 2.33 X AS O Assume there are 250 trading days. O =O (250^0.5) .. wer/250 by (10^0.5) Group of answer choices 2.97 million 3.02 million 2.31 million 2.65 million 2.44 million You are running a hedge fund with a long position of 4,000 shares of IBM, and a short position of 6,000 shares of Intel. IBM is currently trading at $190 per share, and Intel is trading at $100 per share. Over the past year, the volatility of IBV's stock was 8% per day, the volatility of Intel's stock was 5% per day, and the correlation between the two company stocks was 0.6. Suppose your hedge fund's capital equals the value of its current positions. During the past year, there was one day in wbich IBM's shares fell 4%. On that same day, Intel's shares rose by 6%What is the change in capital (S) for the fund that day? Group of answer choices -60,424 66,400 -53,120 -93,600 84,992 Repos and fed funds borrowed are examples of purchased liquidity, Group of answer choices True False . Consider the balance sheet for the DI listed below: Assets Liabilities (in millions) 5 25 30 (in millions) 50 10 Cash Securities Loans Deposits Equity The DI is expecting a $10 million net deposit drain. Show the Di's balance sheet when Dl purchases liabilities to offset this expected drain. Group of answer choices 0 Assets Cash Securities Loans in millions) 42 (in millions) 0 22 30 Liabilities Deposits Equity 10 Assets Cash Securities Loans (in millions) 43 (in millions) 0 23 30 Liabilities Deposits Equity 10 in millions) (in millions) Assets Cash 5 Liabilities Deposits 41 Borrowed Funds 9 Equity 10 Securities 25 Loans 30 Assets Liabilities (in millions) Cash Securities Loans (in millions) 5 25 30 Deposits 43 Borrowed funds 7 Equity 10 (in millions) Assets Cash Securities Loans (in millions) 5 25 30 Liabilities Deposits 40 Borrowed Funds 10 Equity 10 Second National Bank (SNB) (million $) S S Funds borrowed Maximum amount SNB can still borrow Cash-type assets Excess cash reserves Federal reserve borrowings S 5,750 9,250 3,700 80 20 $ S What are Second National Bank's net liquidity? Group of answer choices 12.780 $6,270 $7.260 $5.770 $13,030 A financial intermediary has two assets in its investment portfolio. It has 35 percent of its security portfolio invested in one-month Treasury bills and 65 percent in real estate loans. If it liquidated the bills today, the bank would receive $98 per hundred of face value. If the real estate loans were sold today, they would be worth $80 per 100 of face value. In one month, the real estate loans could be liquidated at $95 per 100 of face value. What is the intermediary's one-month liquidity index? Hint: I = P where w;= weights of the portfolio based on the face value of the assets, P = fire-sale price of asset i P:* = anticipated values in one year of asset i Group of answer choices 0.93 0.91 0.90 0.92 0.89 Use the following balance sheet information to answer this question. Duration Amount T-bills 0.5 S 500 T-notes 0.8 S 50 T-bonds 4.5 S 200 Loans 7 S3,000 Deposits 1 $2,750 Federal funds 0.01 S250 Equity S750 If the entire yield curve shifted upward 0.5 percent (i.c., AR/(1 + R)=0.0050), what is the change in the FI's market value of equity? Hint: The duration of a portfolio of assets or liabilities is the market value weighted average of the durations of the component of the portfolio. DGAP = DA - KD where k = L/A = Measure of the FI's leverage (i.e. the amount of borrowed funds or liabilities rather than owner's equity used to fund its asset portfolio.) AMVE = - Leverage adjusted duration gap x Asset Size x Interest Rate Shock In other words, AMVE = -DGAP(A) AR/(1+R) Group of answer choices -29.16 -145.78 -97.19 -174.94 -48.59 Consider a 15-year, 6 percent annual coupon bond with a required return of 4 percent. The bond has a face value of $1,000. Which of the following is correct? Round your calculations/answers to two decimals. I. The price of the bond is 1,222.37. II. If interest rates decline to 3 percent, the price of the bond would be 1,255.91. III. If interest rates decline to 3 percent, the percentage change in price would be 11.11 percent. Group of answer choices C I and II only I, II, and III I only Il only I and III only What is the duration of a two-year bond that pays an annual coupon of 3 percent and has a current yield to maturity of 6 percent? Use $1,000 as the face value. Round your calculations/answers to two decimals. McDUR Pa = (1 + y)PVIFA2 y Hint 1: Step 1. C/P McDUR =n-[n-McDUR][ Step2 Hint 2: McDUR = PV(cash flows weighted by year of receipt) / PV(cash flows) Group of answer choices 1.93 years 1.97 years 1.95 years 1.99 years 1.91 years Consider the following balance sheet for Watchover Savings Inc. (in millions): Assets Liabilitics and Equity $100 $125 Floating-rate mortgages NOW deposits (4%) (8%) $150 $75 30-year lixed-rate loans (7%) 5-year time deposits (5%) Equity $50 Total $250 Total $250 What will be the decline in the net interest income at year-end if interest rates rise by 3 percent? Group of answer choices 0.75 million 0.20 million 0.5 million 0.15 million 0.25 million Imagine that you are managing a trading portfolio worth S60 million. The return on your portfolio is normally distributed with an annual standard deviation of 30% What is the 1-day VAR with 99% confidence? Ilint: VAR (99%)= 2.33 X AS O Assume there are 250 trading days. O =O (250^0.5) .. wer/250 by (10^0.5) Group of answer choices 2.97 million 3.02 million 2.31 million 2.65 million 2.44 million You are running a hedge fund with a long position of 4,000 shares of IBM, and a short position of 6,000 shares of Intel. IBM is currently trading at $190 per share, and Intel is trading at $100 per share. Over the past year, the volatility of IBV's stock was 8% per day, the volatility of Intel's stock was 5% per day, and the correlation between the two company stocks was 0.6. Suppose your hedge fund's capital equals the value of its current positions. During the past year, there was one day in wbich IBM's shares fell 4%. On that same day, Intel's shares rose by 6%What is the change in capital (S) for the fund that day? Group of answer choices -60,424 66,400 -53,120 -93,600 84,992