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With respect to convexity, the lower the coupon rate, the lower the convexity (true or false) Capital bank has interest income of $4,250 million and
- With respect to convexity, the lower the coupon rate, the lower the convexity (true or false)
- Capital bank has interest income of $4,250 million and interest expense of $3,175 million. Net equity for the bank is $25,000 million and total liabilities are $42,000 million. What is the net interest margin for the bank?
- 6.34%
- 4.30%
- 2.56%
- 1.60%
- 17.00%
- If interest rates jumped from 4% two 4.25%, by how much will Treasure bond future contracts change if the treasury bond has a duration of 9.5 years and contracts are quoted at 125-12?
- -$2,857
- $2,857
- -$2,863
- $2,863
- -$3,128
- Most banks have positive convexity. (true or false)
- Hartford bank needs to borrow $425 million by selling monthly time deposits with 180-day maturities. If comparable deposit rates are 2.25%, what is the cost of issuing these deposits?
- $9,562,500
- $1,593,750
- $885,417
- $796,875
- $318,750
- Which of the following is not a method for measuring Asset-Liability Gap Analysis?
- The credit spread method
- The repricing models
- The maturity models
- The duration models
- All of the above
- Access bank intends to purchase home mortgages with a target return of 6.5%. the bank is concerned that rates will drop, and the cost of the portfolio will rise from the current $50 million price. In 3-months rates are expected to be at 5% and treasury bonds options are quoted at $110,000 with a premium of $800 and the forecast to fall to $95,000. Should access bank buy puts or calls, and what is the pre-tax profit/loss per contract?
- Call, -$14,200
- Put, -$14,200
- Call, $14,200
- Put, $14,200
- Cannot be determined
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