We want a regression model to predict USGross. 17. A bank following a(n) _________________________ liquidity management strategy must make sure that assets with the least profit potential are sold first. What factors would you consider in deciding whether to use wide or narrow control limits for If this bond is sold at the end of four years for $1046 (ex-interest), what is the holding period return on this bond? The Sasser State Bank has just sold $25 million in Treasury Bills. 50. This bank has a marginal tax rate of 30%. Which of the following statements is (are) correct regarding duration? Issues in Negotiating Cash-Free Debt-Free Deals Prepared By; Current Cash Debt Coverage Ratio Example; The Money Supply Process - Hubbard, Chap 17; Money Laundering Through the Physical Transportation of Cash October 2015; Money Supply; Public Finance Resource Management; Bank Regulation and the Effectiveness of Open Market Operations . | Are We There Yet? The Taylor Treadwell Bank has just calculated the ratio of its demand deposits to total time deposits. 37. 0 wui | PRODUCT | PROFIT PER UNIT (S) | The Hollingsworth National Bank maintains an average clearing balance of $7,000,000 with the Federal Reserve. stable deposits that are not typically withdrawn over short periods of time. b. the times per period the average inventory balance is sold. What is the duration of this bond? TD33. Coupon payments are made annually. It has 11 years to maturity and is currently selling in the market for $887.52. The bank is in the 35 percent tax bracket. So; the credit-deposit ratio broadly means the ratio of assets and liabilities of the banks. Restricted Cash on the Balance Sheet. 22. The cash-deposit ratio for a bank is equal to (total cash)/ (total deposits). A manager that uses ratios such as cash and deposits due from banks to total assets and U.S. government securities to total assets to measure a firm's liquidity position is using: Click the card to flip Definition 1 / 10 C. the liquidity indicator approach. d. its sales of inventory sold on account. 32. 19. 43. Coupon payments are made annually and the bond has a face value of $1,000. The bond makes annual coupon payments. The profits per bag and weekly hours available for cutting and dyeing and for sewing and finishing are as follows: Financial Ratios. Which of the following is a risk of using credit derivatives? Received cash for the value of Time Draft No. X"c^/:t!##%tE&Ff 5ddd3d*r S~PF 28H##q2Qhht. | | *HOURS REQUIRED PER BAG* | | Liquid assets include cash and due from banks, trading securities and at fair value through income, loans and advances to banks, reverse repos and cash collaterals. 1C!XH10,h(c0 N^ The bond makes annual coupon payments. Given that the bank must hold 3 percent legal reserves up to $47.8 million of transaction deposits and 10 percent legal reserves on any amount above that, how much has this bank reduced its total legal reserves as a result of these sweep arrangements? forecasts? The Harmony Bank of the South has just increased its Federal Funds Purchases. 40. Coupon payments are made annually and the bond has a face value of $1,000. The Federal funds rate is currently 4.5 percent. 38. The booklet also discusses prudent risk management practices and regulatory requirements. 46. 33. The Johnson National Bank has purchased a bond that has a coupon rate of 5.5% and a face value of $1000. B. Borrower repays $1,500 of a loan he had taken. Foreign banks maintain interest bearing time deposits, known as "due from bankstime," with other foreign banks and overseas branches of U.S. banks. | Standard bag | 10 | 3) deposits held in foreign offices. A bond has eight years to maturity and a coupon rate of 6.5 percent. hQk0}$IX7cJ%I;d`qp??Nm19*{ 48. 4. All of its loans are agriculture and small business loans in Guyman. Capital gains on municipal bonds are: D. Fully taxable except for appreciate to pay for bonds originally issued at a discount, C. securities that ay interest only if the underlying index stays in the predetermined range. Holding a large amount of cash is considered a loss in opportunity cost for other sectors. A bond has six years to maturity and has a coupon rate of 7.5 percent. Sometimes banks also hold cash for other banks, and one of the significant services banks provide is to provide cash on demand. What is the holding period return on this bond? Due to the inherent risks in relying on borrowed liquidity and costs of storing liquid assets, most financial firms compromise by using: 10. In comparing two loans with the same maturity and the same interest rate, a fully amortized loan will have a shorter duration than a loan with a balloon payment. What is the holding period return on this bond? E. a treasury bond to finance government debt. 2) stable deposits that are not typically withdrawn over short periods of time. 19. What does it mean? A bank currently has $150 million in "hot money" deposits against which it wants to hold an 80 percent reserve and $90 million in vulnerable deposits against which it wants to hold a 30 percent reserve. 49. | Deluxe bag | 8 | What is the net after-tax return on this bank-qualified municipal bond? endstream endobj 183 0 obj <>stream Those assets may also be referred to as placements, placings, interbank placements (deposits), or redeposits. The Johnson National Bank has purchased a bond that has a coupon rate of 5.5% and a face value of $1000. | Sewing and finishing | 360 | B. checks being cashed at local stores and directly from the bank. The Federal funds rate is currently 6.5 percent. What is the duration of this bond? 12. Those funds, known as due from bank deposits or correspondent bank balances, are a part of the primary, uninvested funds of every bank. The cash receipts and general journals for Jan Hakeem Exports, Ltd. are given in the *Working Papers*. \ a. the days it takes to sell its average inventory balance. It has 4 years to maturity and is selling in the market for $917. What is the yield-to-maturity on this bond? "Core deposits", "hot money", and "vulnerable money" are categories of funds under which of the following methods of estimating a bank's liquidity needs? 41. In the first 2 days of the maintenance period, it maintains a balance of $450 million, the next three days it maintains a balance of $700 million, the next two days it maintains a balance of $650 million, the next three days it maintains a balance of $450 million, and the next three days it maintains a balance of $650 million. 20. What type of risk are these ratings attempting to measure? Refer to 12 USC 3102(b) and the "Federal Branches and Agencies Supervision" booklet of the Comptroller's Handbook for more information. 42. The credit-to-deposit (CTD) or loan-to-deposit ratio (LTD) is used for measuring a bank's liquidity by dividing the bank's total loans disbursed by the total deposits received. Saleable loans appear to have several advantages over bonds for many investors due to: E. All the options are advantages of saleable loans over bonds. Received a 60-day time draft from Elias Harmon for an international sale,$7,000.00. What is the after-tax yield on this bond? 4) the most interest rate sensitive liabilities of a bank. Those funds, known as due from bank deposits or correspondent bank balances, are a part of the primary, uninvested funds of every bank. 18. Why are securitized loans often issued through a special-purpose entity? According to Kwan (2000), deposits to asset ratio measures the magnitude of assets being funded by public deposits. 5) vault cash. - Cash items Due From Banks - bank assets that consist of demand and time deposits maintained in other banks to facilitate the transfer of funds Cash - Each bank should establish a policy to maintain cash balances at the minimum levels necessary to serve its customers. 22. **Transactions:** 13. c. how many days it takes to collect. A bank currently has $50 million in stable deposits against which they want to keep 10% reserves, $100 in vulnerable deposits against which they want to keep 40% reserves, and they have $50 million in "hot money" deposits against which they want to keep 90% reserves. b) Why is the "Adjusted R Square" in the table different from the "R Square"? \begin{array}{lcccr}\text { Variable } & \text { Coefficient } & \text { SE(Coeff) } & \text { t-ratio } & \text { P-value } \\ \text { Intercept } & -22.9898 & 25.70 & -0.895 & 0.3729 \\ \text{ Budget(\$) } & 1.13442 & 0.1297 & 8.75 & <0.0001 \\ \text { Stars } & 24.9724 & 5.884 & 4.24 & <0.0001 \\ \text { Run Time } & -0.403296 & 0.2513 & -1.60 & 0.1113\end{array} Which liquidity indicator is this? An investor's return on a T-bill consists purely of: 52. If a bank's management uses "the discipline of the financial marketplace" to gauge its liquidity position, one of the indicators of this market test of adequacy of a bank's liquidity position is: D. size of risk premiums on CDs the bank issues. 24. Which of the following is an option when a liquidity deficit arises and a bank wants to borrow liquidity to cover the deficit? What amount of credit will the bank earn over the reserve maintenance period that can be used to offset any fees charged by the Federal Reserve? Cash and balances due from ot her banks generally represent an institution's primary liquidity reserves, except to the extent they include required reserves. What can predict how much a motion picture will make? Which type of factor affecting legal reserves is this for the bank? A bank money manager estimates that the bank will experience a liquidity deficit of $400 million with a probability of 10 percent, a liquidity deficit of $900 million with a probability of 20 percent, a liquidity surplus of $600 million with a probability of 30 percent, and a liquidity surplus of $1,200 with a probability of 40 percent over the next month. A bank or financial service institution can generally meet reserve requirements using all of the following except: 36. 16 Selected Performance Indicators : Universal and Commercial Bank Group : as of end of periods indicated Which type of factor affecting legal reserves is this for the bank? What is the yield-to-maturity on this bond? 14. The bank must hold 3 percent legal reserves up to $43.9 million of transaction deposits and 10 percent legal reserves on any amount above this. What is the yield-to-maturity on this bond? 43. A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. | :--- | :---: | 1. The Price Perpetual Bank has purchased a bond that has a coupon rate of 5.5% and a face value of $1,000. | Standard bag | 1/2 | 1 | The Caldwell National Bank has purchased a bond that pays a coupon rate of 10.5%. A person responsible for overseeing an institution's legal reserve account is called: 17. hZ]oHRr}HHI 4dILhFF3wrq^Uu}e%Lkh53 c!{&&! Due to the cash not being readily available for use, cash that is restricted is generally excluded in several liquidity ratios. Researcher has used data from the annual reports of the bank. It has 16 years to maturity and is currently selling in the market for $1309.80. B. | :--- | :---: | :---: | :---: | :---: | 5. J?62#PcFRP' Recorded an international cash sale, $14,000.00. The inventory turnover ratio directly measures: What type of risk is the Dillinger State Bank worried about? B. Balance Sheet (in millions) Assets . Suppose you won the lottery. View Test Prep - 422 from FINANCE 480 at University of Nebraska, Lincoln. The Simpson State Bank of Stillwater has just sold Federal funds to another bank in its Federal Reserve district. 59. The bank's net liquidity position for the week is expected to be: 5. 46. A bank currently holds $105 million in transaction deposits subject to legal reserves but has managed to enter into sweep account arrangements affecting $55 million of these accounts. Dependent variable is: USGross(\$)$R$squared$=47.4 \%$R squared (adjusted)$=46.0 \%s=46.41$with$120-4=116$degrees of freedom$ The Wesson Wisconsin State Bank has purchased a bank-qualified municipal bond with a coupon rate of 7.5%. The two most pressing demands for liquidity from a bank come from, first, customers withdrawing their deposits and, second, from: A. 33. 47. A customer withdraws $1,000 from their account. In announcing NBHC's second quarter 2022 results, Tim Laney shared, "We are pleased to deliver strong quarterly earnings of $0.67 per diluted share and revenue growth of 42.4% The totaldeposits consists of deposits in current account, saving account, fixed deposit account, moneyat call deposits, margindeposits etc. Each golf bag requires time for cutting and dyeing and time for sewing and finishing, as shown in the following table: We have data on a number of recent releases that include the USGross (in SM), the Budget (\$M), the Run Time (minutes), and the average number of Stars awarded by reviewers. Use page 12 of a cash receipts journal and page 5 of a general journal. On the first day of the maintenance period it maintains a balance of $750 million, the next two days it maintains a balance of $725 million, the next three days it maintains a balance of $625 million, the next three days it maintains a balance of $775 million, the next two days it maintains a balance of $700 million, and the next two days it maintains a balance of $675 million. It is a little concerned because it believes rates will decrease in the future and they will not be able to reinvest the coupon payments at the same rate. | Deluxe bag | 1 | 2/3 | The Burr Bank has just calculated the ratio of its U.S. Government Securities to Total Assets. What is the net after-tax return on this bank-qualified municipal bond? A. Why might that event cause you stress? | Alone in the Dark | 5.178569 | 20 | 96 | 1.5 | Credit requests from customers the bank wishes to keep. Efficiency Ratio The efficiency ratio assesses the efficiency of a bank's operation by dividing non-interest expenses by revenue. 45. | Cutting and dyeing | 300 | Suppose a bank has found bank-qualified municipal bonds which have a nominal gross rate of return of 8 percent and that it can borrow funds needed for this purchase at a rate of 6.25 percent. Distressed Assets Ratio: 18.38 : 16.49 : Distressed Assets : NPA : RL, Performing : TLP, gross Total ROPA (1) ROPA, gross (2) Performing SCR : LIQUIDITY RATIOS (1) Cash and Due from Banks to Deposits: 31.48 : 30.65 : Cash and Due from Banks Deposits (2) Liquid Assets to Deposits Ratio: 56.93 : 54.45 : Liquid Assets, sum of: (1) Cash and Due . Par, Inc., produces a standard golf bag and a deluxe golf bag on a weekly basis. Recent research on money position management suggests that the reserve deficits of smaller depository institutions normally occur: C. late in the reserve maintenance period. Which of the following is an example of a source of funds? What type of risk is it likely trying to reduce with this purchase? hWmo6X"Nu\x h %JbIt^wnf:H;>:s (hPrE)S;H"8P){(sk~eX" N(5_E>P_~4&L&=`D%Ib@1I83GYPyjz$VR\Kz- r[&STV\LRMGf8|Eh:d(8 ahq8+~:,:}(3w7m\U^hiG/{;Y}i7a*uid3E*dfOXSK H*-1F^OX/mxC51=>l_5i]uQ6rh#Z*4&ri[ B. most liquidity problems in the banking system arise from outside the bank. A customer withdraws $1,000 from their account, Don Herrmann, J. David Spiceland, Wayne Thomas, Fundamentals of Financial Management, Concise Edition, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield. Recorded an international cash sale,$13,500.00. The Dillinger State Bank has purchased a bond issued by the Interstate Manufacturing Company that has 15 years to maturity and has a coupon rate of 12.5%. Bonds backed by pools of home equity loans often carry higher yields than other loan-backed securities because of their substantial: 63. The Farmer National Bank has purchased a bond that has a coupon rate of 11.5% and a face value of $1000. The bond makes annual coupon payments. \8PQ` -)NH The Sheets Savings and Loan Association has purchased a bond that has a coupon rate of 7.5% and a face value of $1000. Which of the following is a guideline for liquidity managers of banks? The Ferson National Bank is thinking about purchasing a municipal bond that pays a coupon of 5.5%. When some of a bank's expected demand for liquidity are stored in its assets, while other unexpected cash needs are met from near-term borrowings, the approach to liquidity management is known as: For a bank, there is always a trade-off problem between liquidity and: A manager that looks at loans and deposits increases and decreases among other things to measure the bank's liquidity position is using, A. the sources and uses of funds approach. The Fed funds market is most volatile on a bank: 34. Which liquidity indicator is this? | Indigo | 51.100486 | 25 | 105 | 3.5 | 15. Lending activities can be directly performed by the bank or indirectly through capital markets.. Because banks play an important role in financial stability and the economy of a country, most jurisdictions exercise a high degree of regulation over banks. 31. The Terrell State Bank is a small bank located in Guyman, Oklahoma. 29. The first several entries in the data table look like this: What is the bank's total legal reserve requirement? **Instructions:** John Camey, the money manager of the First State Bank, has estimated that the bank has a 20 percent chance of a liquidity deficit of $700 million, a 30 percent chance of a liquidity deficit of $200 million, a 30 percent chance of a liquidity surplus of $400 million and a 20 percent chance of a liquidity surplus of $900 million over the next week. June 1. Journalize the following international sales completed by Jan Hakeem Exports, Ltd. during June of the current year. 16. The Taylor Treadwell Bank has just calculated the ratio of its net loans and leases to total assets. 30. A bond has eight years to maturity and a coupon rate of 6.5 percent. A bank that is concerned that the economic conditions of the market area they serve may take a downturn with falling demand for loans and higher bankruptcies in the areas, is concerned about which of the following? hb```b``>>x 0v`.43 c)p HrZ|H30A=@TT A $1,000 bond has three years to maturity and has a coupon rate of 15 percent. Among other things, interested banks will witness a "reduction in Cash Reserve Requirement Ratio (CRR) to 12% on GHC deposits; and maintain a CRR of 12% on foreign currency-denominated deposits to . | ACTIVITY | WEEKLY HOURS AVAILABLE | 39. What is the after-tax yield on this bond? 32. The bond makes annual coupon payments. What is the bank's liability liquidity reserve? 42. - Part 326 requires procedures for safekeeping of currency be established 54. The Hora National Bank has just received notice that a large depositor with the bank wants to close its account immediately. 2 This rise . Which of the following would not be considered a bank-qualified municipal security? The bank has a marginal tax rate of 25%. 325 0 obj <> endobj Cash and cash equivalents consist of short term, highly liquid investments that are readily convertible to known amounts of cash and are so near their maturity that they present negligible risk of changes in value due to changes in interest rates -- usually with an original maturity less than 90 days. Sales tax is not charged on these sales. What is the duration of this bond? Which liquidity indicator is this? M79. 20. f M[z}@oZ1t0i"UP"Iq*E X_D%w 2n`w>0'*M 2knm^o=*9m_0EE973U[NY]{}eKEYs{Sqc~kLf\EVwoi5R'O'9p']rg FYY;nK{T{w'\r`K&lv(@`+NO5ok209|IEM$llw Moody's Investor Service has added the numbers 1, 2, and 3 to some of their ratings. 41. 21. A bank maintains an average clearing balance of $5,000,000 with the Federal Reserve. Which of the following is an option when a liquidity deficit arises and a bank wants to use stored liquidity in its assets to cover the deficit? It has 5 years to maturity and is currently selling in the market for $1063. | Racing Stripes | 49.772522 | 30 | 110 | 3 | The bank had to borrow funds to make this purchase at a cost of 6%. Which type of factor affecting legal reserves is this for the bank? The base amount of transaction deposits for a depository institution above which the legal reserve requirement changes to ten percent is known as: 58. The bank is in the 40% tax bracket. The Federal Funds rate is currently 5.25 percent. The two most pressing demands for liquidity from a bank come from, first, customers withdrawing their deposits and, second, from: A. credit requests from customers the bank wishes to keep. Interest-earning Deposits Interest-Earning Deposits represents interest-earning deposits with other banks and financial institutions. The HTR Bank of Summerville has just calculated the ratios of its money market (short term) assets to volatile liabilities. What does its balance at the Fed has to be on the last day of the maintenance period in order to have a zero cumulative reserve deficit? The Roy State Bank has just purchased a portfolio of asset-backed securities. 28. A. a controllable factor increasing legal reserves. 44. What source of liquidity does this represent to the bank? B. 40. A security where the interest payments and the principal payments are sold separately is called: A. is higher on high interest rate mortgages. C. A controllable factor decreasing legal reserves. A manager that uses ratios such as cash and deposits due from banks to total assets and U.S. government securities to total assets to measure a firm's liquidity position is using: Which of the following is an option when a liquidity deficit arises and a bank wants to use stored liquidity in its assets to cover the deficit? Balance Sheet (in millions) Assets Liabilities and Equity Cash and due from banks $ 9,200 Demand deposits $ 21,000 Investment securities 25,000 NOW; Question: Megalopolis Bank has the following balance sheet and income statement. 47. The Fed funds rate usually hovers around the Fed's: 35. A. 54. 29. 10. 330 0 obj <>/Filter/FlateDecode/ID[<6CF3064D153AB5CAE8EFE0EFA67A6693>]/Index[325 89]/Info 324 0 R/Length 51/Prev 41667/Root 326 0 R/Size 414/Type/XRef/W[1 2 1]>>stream R117. 24, $18,000.00. An investor can invest in either a tax-exempt security that pays 5%, or a taxable corporate security of comparable risk and maturity that pays 8%. The legal reserves for this bank are 10% of all deposits. The Lancaster State Bank is thinking about purchasing a corporate bond that pays a coupon of 8.5%. What is the net after-tax return on this bond? The Farmer National Bank plans on selling this bond at the end of 8 years for $1071 (ex-interest). Fluctuations in the timing of cash-flows arising out of an underlying pool of securitized assets is referred to as: 8. B. a non controllable factor increasing legal reserves. _____________ indicators tend to be highly sensitive to the season of the year and stage of the business cycle. >4FL0H%d}aQ_ EO^;B9( SbD'ESF# JAl'=%eK`s(e ]f1HQRNp The bond is currently selling in the market for $1,127. Which of the following asset classes is considered as the riskiest for a bank? Which of the following is true of Treasury bills? C. demands for wired funds from correspondent banks. An official website of the United States government, March 1990 (narrative), March 1998 (procedures). A manager that examines the bank's stock price behavior and risk premium on the CDs to measure liquidity position is using: 31. The Carey State Bank has purchased a bank-qualified municipal bond with a coupon rate of 6%. #1LtgYf1+(J %%EOF Different ratio return on asset, return on equity, Cash to deposit, debt to total . The bond is currently selling in the market for $1,072 and has a yield-to-maturity of 12%. Cash and due from depository institutions U.S. Treasury securities Other securities Pledged securities Federal funds | White Noise | 56.094360 | 30 | 101 | 2 | | Coach Carter | 67.264877 | 45 | 136 | 3 | 0 Applicability This booklet applies to the OCC's supervision of national banks and federal savings associations. Total deposits at domestic commercial banks rose by more than 35 percent since the end of 2019 and stood at around $18 trillion as of the fourth quarter of 2021 (Figure 1). 39. 19. What is this bank's expected liquidity deficit or surplus next month? Failure to exclude the cash in the calculation of . 18. How does the deposit to asset ratio work? The Peace Bank of Ohio has just received a $50 million credit at the local clearing house. Which of the following is an example of a use of funds? 21. Mathematically,Cash & Bank Balance to Total Deposit Ratio = Cash & Bank BalanceTotal DepositCash and bank balance includescash in local currencyand foreign currencyon handor with banks. E. All of the options are concerns regulators have about securitization. The bank is in the 25% tax bracket. The Stumbaugh State Bank is thinking about purchasing a corporate bond that pays a coupon of 9%. For statutes, regulations, and guidance referenced in this booklet, consult those sources to determine applicability to federal savings associations. R115. The partner in a swap or an option contract may fail to perform. What is the yield-to-maturity on this bond? | Movie | USGross ($M) | Budget ($M) | Run Time (minutes) | Stars | D. a non controllable factor decreasing legal reserves. question: question 16 assets liabilities cash and due from banks $9,000 demand deposits $19,000 investment securities 23,000 now accounts 89,000 repurchase agreements 42,000 retail cds 28,000 loans 90,000 debentures 19,000 fixed assets 15,000 total liabilities $ 155,000 other assets 4,000 common stock 12,000 total assets $183,000 paid-in capital Tw Y=Q`VbfD:0g$fE\*B TD34. p1IpLZd c|,Sp JrN1mSA,+-{t$NDa:N[y 44. The bond makes annual coupon payments. 1) the bank's deposits at the Federal Reserve. A demand deposit is a type of account from which funds may be withdrawn at any time without having to. 37. For a bank, there is always a trade-off problem between liquidity and: 6. 23. Liquid assets include cash and due from banks, trading securities and at fair value through income, loans and advances to banks, reverse repos and cash collaterals. endstream endobj 184 0 obj <>stream . 18. Typically, the ideal loan-to-deposit ratio is 80% to 90%.. A manager that uses ratios such as cash and deposits due from banks to total assets and U.S. government securities to total assets to measure a firm's liquidity position is using: 30. While the largest U.S. depositories are required to settle their legal reserve requirements with the Federal Reserve over successive bi-weekly periods, the more numerous but smaller banks are required to do so: 57. Excessive cash or due from 36. 51. \ Megalopolis Bank has the following balance sheet and income statement. The bond makes annual coupon payments. Unlike "due from banksdemand" What is the after-tax yield on this bond? TD27. References to national banks in this booklet also generally apply to federal branches and agencies of foreign banking organizations. 52. Click the card to flip Flashcards Learn Test Match Created by twielgos )DJVq&3lHUQjg;5xch!`[4D#I0hi(!%~Z. :?v%Gub]%4eD:htXy.b}wSP}m^hZ6mhgQkbp9U7[!WxmfhptzteH^H_RX1mXQ OrG y?8>U~lirZnD7j1Faa.I\oq48,3S sN:m{\ ~iI6~sMU K:pr:$qLoM}5iI*v-39T{=R6&Q3hhtytZ_5j1-.w_&^vOptmXG@ut0]MS]5w^?c:` ,(hL It wants to buy a municipal bond from the state of South Carolina. The bank must maintain liquidity to operate and will hold an amount of cash to service net withdrawals. Received cash for the value of Time Draft No. The majority of a bank's revenue is derived from collecting interest on loans. It has 16 years to maturity and is currently selling in the market for $1,309.80. Units: Percent, Not Seasonally Adjusted Frequency: Annual Notes: The ratio of the value of liquid assets (easily converted to cash) to short-term funding plus total deposits. If the yield curve is upward sloping: B. investors often shift their investment holdings away from longterm securities. 53. $a) What is the$R^2$ for this regression? 56. $$ A bank is required to maintain an average daily balance at the Fed of $600 million. The Shirley State Bank has $90 million in transaction deposits subject to legal reserves. | Assault on Precinct 13 | 20.040895 | 30 | 109 | 3 | Subsidiaries of a commercial bank may have deposits with . 25. A financial institution that is concerned about the possibility that the purchasing power of both the interest income and repaid principal on a loan will decline is concerned about which of the following? Legal reserves for the bank are 5 percent of all deposits. A bank maintains an average clearing balance of $1,000,000 with the Federal Reserve. | 82.674398 | 20 | 94 | 2 | Received a 30-day time draft from Juan Mendez for an international sale, $26,500.00. What is the credit the bank will earn over the maintenance period that can be used to offset any fees charged by the Federal Reserve? What is the bank's liability liquidity reserve? Which liquidity indicator is this? It indicates how much of a bank's core funds are being used for . Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Daniel F Viele, David H Marshall, Wayne W McManus, Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield. Due from banks represents receivables from, or short-term loans to, other banks and/or financial institutions, which usually bear minor interest earnings. 34. 35. M83. hX[7+J"UH\m !Q! The bond is currently selling in the market for $862. Which of the following statements is correct? Received a 30-day time draft from Bella Lamas for an international sale,$12,000.00. This booklet focuses on the risks inherent in deposits that banks maintain in other banks to facilitate the transfer of funds. This booklet applies to the OCC's supervision of national banks and federal savings associations. The Price Perpetual Bank is planning on selling this bond at the end of 5 years for $1,036.50 (ex-interest). Present paper aims to compare two banks in Iraq namely commercial bank of Iraq and Central bank of Iraq. Par, Inc., will sell whatever quantities it produces of these two products. 55. Find the mix of standard and deluxe golf bags to produce per week that maximizes weekly profit from these activities. The bank has had to borrow funds to make this purchase at a cost of 5.25%. When a bank's sources of liquidity exceed it uses of liquidity, the bank will have a: 11. What amount of credit will the bank earn over the reserve maintenance period that can be used to offset any fees charged by the Federal Reserve? It also has $45 million in stable deposits against which it wants to hold a 5 percent reserve. 24. David Ashby has just paid off the balance on his home mortgage with First American Bank. 9. *YYCAH'd5sa At what marginal tax rate will the investor be indifferent between these two securities? Reasons for cash being restricted include bank loan requirements, payment deposits, and collateral pledges. International Due from BanksTime. | Elektra | 24.409722 | 65 | 100 | 2 | hbbd``b` BHpZOLW,Qb O35 21. | :--- | :---: | :---: | Cash is money in the form of currency, which includes all bills, coins, and currency notes. The bank has a marginal tax rate of 40%. To calculate the loan-to-deposit ratio, divide a bank's total amount of loans by the total amount of deposits for the same period. Which type of factor affecting legal reserves is this for the bank? The formula for net interest margin is: Net Interest Margin = (Interest Income - Interest Expense) / Total Assets Ratios for Efficiency 1. What is the bank's expected liquidity deficit or surplus over the next week? Study period is 2018-2020. But in the case of a Bank's Balance Sheet, cash is a source of income and is held on deposit. The Price Perpetual Bank has purchased a bond that has a coupon rate of 5.5% and a face value of $1000. 3. Which of the following is also referred to as a bank's crossroads account? Which of the following is a concern regulators have about securitization? What type of risk are they concerned about? What source of liquidity does this represent to the bank? endstream endobj startxref D. Because the bank might fail and this protects the credit status of the securitized loans. | :--- | :---: | 39. \ 182 0 obj <>stream The bond makes annual coupon payments. FY*64Ku)59QXuz}( ]:tiM'J}?&!~j(87W 4Px|0\5Yte\Y[/byTSltWe=(i7$Tk*J> K`v2NFf!Gq|ssCniYkY+mQ_zv_(w|s E. All the options are guidelines for liquidity managers. A bank following a(n) _________________________ liquidity management strategy must take care that assets with the least profit potential are sold first. Which of the following is an example of a use of funds? The Farmer National Bank has purchased a bond that has a coupon rate of 11.5% and a face value of $1,000. 38. What is the yield-to-maturity on this bond? %PDF-1.5 % 25. 28. Primary Reserves . It has 4 years to maturity and is currently selling in the market for $917. This bond is currently selling in the market for $862. Bank works as a backbone for any economy. Third-Party Relationships: Risk Management Guidance, Central Application Tracking System (CATS), Office of Thrift Supervision Archive Search, Federal Branches and Agencies Supervision. What type of risk do these securities have that other securities do not have? _____________ is a strategy of protecting securities purchased from loss of return, no matter which way interest rates go. What does its balance at the Fed has to be on the last day of the maintenance period in order to have a zero cumulative reserve deficit? A notable development in the U.S. banking system following the onset of the COVID-19 pandemic has been the rapid and sustained growth in aggregate bank deposits. In the week about to begin, a bank expects $30 million in incoming deposits, $20 million in deposit withdrawals, $15 million in revenues from the sale of nondeposit services, $25 million in customer loan repayments, $5 million in sale of bank assets, $45 million in money market borrowings, $60 million in acceptable loan requests, $10 million in repayments of bank borrowings, $5 million in cash outflows to cover other operating expenses, and $10 million in dividend payments to its stockholders. Parts of the regression output computed in Excel look like this: When some of a bank's expected demand for liquidity are stored in its assets, while other unexpected cash needs are met from near-term borrowings, the approach to liquidity management is known as: 16. When reviewing activities related to cash and due from bank accounts, examiners should consider the issues discussed below. 21, $22,000.00. The booklet also discusses prudent risk management practices and regulatory requirements. 7~:~i6#F #vu` > ]+4?h Hn0W,/]hf&9e{0BJ7w}XUYhyL~}qH Jc$Ew:d*dGD24RF*OLm]>\"mQHN | PRODUCT | CUTTING AND DYEING | SEWING AND FINISHING | The . The two most pressing demands for liquidity from a bank come from, first, customers withdrawing their deposits and, second, from: A. credit requests from customers the bank wishes to keep. Market interest rates have recently declined to 8% and the Dillinger State Bank is worried that the Interstate Manufacturing Company will retire the bond and issue new ones with a lower coupon rate. Coupon payments are made annually and the bond has a face value of $1,000. 413 0 obj <>stream 48. The cash-deposit ratio of scheduled commercial banks in India (cash in hand and balances with the RBI as percentage of deposits) is observed to be high at 8.2 per cent as at end-March 2011. 3. $$ The most important source of liquidity for a depository institution is: 55. It performs very crucial role for the development and movement of economy. A bank is required to maintain an average daily balance at the Fed of $700 million. endstream endobj 326 0 obj <>/Metadata 20 0 R/OCProperties<>/OCGs[331 0 R]>>/Outlines 27 0 R/PageLabels 321 0 R/PageLayout/OneColumn/Pages 323 0 R/PieceInfo<>>>/StructTreeRoot 64 0 R/Type/Catalog>> endobj 327 0 obj <>/Font<>/ProcSet[/PDF/Text]/Properties<>>>/Rotate 0/StructParents 0/Tabs/S/Type/Page>> endobj 328 0 obj <>stream Due to the inherent risks in relying on borrowed liquidity and costs of storing liquid assets, most financial firms compromise by using: If a bank's management uses "the discipline of the financial marketplace" to gauge its liquidity position, one of the indicators of this market test of adequacy of a bank's liquidity position is: D. the size of risk premiums on CDs the bank issues. A manager that looks at loans and deposits increases and decreases among other things to measure the bank's liquidity position is using: A. the sources and uses of funds approach. Financial institutions face significant liquidity problems because of: 9. Source documents are abbreviated as follows: memorandum, M; time draft, TD; receipt, R. %PDF-1.6 % Pools of mortgages put together, either by a government agency or by a private investment banking corporation, to raise more loanable funds for the issuer are known as a(n): 4. Cash and Due from Banks. In a Poisson experiment, the mean and variance are ________. 49. Interstate's on treasury bills is exempt from federal income taxes. 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