Commercial bank management | Financial markets homework help

    

You entertain a portfolio of two branches, Branch A and Branch B and 75 percent of your whole effects are invested in Branch A. The forthfuture instruction is given: 

 

Expected give-back, E(????????)???????????? ????(????????) A 

 

 

Branch Expected give-back 

Branch

B
Note: ????2(????????)=625, 120= Cov(????????, ????????)), ????2(????????)=196 

A. Calculate the expected give-back of the portfolio. B. Compute portfolio trutination derangement of give-back. 

B 12% 

B 120 196 

 

20% 

Covariance matrix A 

625 

 

120 

 

  1. Discuss the differences of poise quibbles of interchangeable banks and nonfinancial firms.
     
  2. What are the main accounts that apology on a bank’s poise quibble (Report of Condition)?
     
  3. Discuss three main characteristics of banks’ poise quibbles.
     
  4. What are nucleus deposits and why are they so essential as a funding beginning for interchangeable banks?
     
  5. What factors swing the accumulation payment of a financial-service confirmation?
     
  6. Suppose that a bank paying an annual dividend of $4 per distribute on its accumulation in the vulgar bound and dividends are expected to enlarge 5% a year complete year, and the insufficiency required give-back-to-equity important inveteobjurgate on the bank’s perceived roll of endanger is 10%. Can you respect the vulgar compute of the bank’s accumulation?
     
  7. What is give-back on equity important, and what view of execution is it deemed to mete? Can you see how this execution mete effectiveness be helpful to the managers of financial firms?
     

 

  

9. UMB has the forthfuture poise quibble and pay narobjurgate instruction. 

 

Assets 

Liabilities and Equity 

 

Cash Securities 

Fed funds sold and mutation repos Loans
Fixed effects Other effects 

Total effects 

2,600 7,000 

87 

6,400 217 339 

16,643 

Deposits
Fed funds alienationd and repos 

Other pretended funds 

All other liabilities Common Accumulation Retained Earnings 

Total liabilities and equity 

13,800 1,584 

91 

21 1,142 

16,643 

 

Selected items on pay narobjurgate (in pets) 

Interest pay 350 Concern payment 15 Provision for advance losses 18 Nonconcern pay 249 Nonconcern payment 463 Taxes 24 

 

(1) Calculate give-back on equity (ROE). (2) Calculate give-back on effects (ROA). (3) Calculate give-back on sales. 

 

  1. Suppose a bank reports that its net pay for the vulgar year is $51 pet, its effects whole $1,144 pet, and its liabilities quantity to $926 pet. What is its give-back on equity important? Is the ROE you entertain adapted amiable or bad? What instruction do you scarcity to apology this last doubt?
     
  2. U.S. Treasury accounts are advantageous for alienation this week at the forthfuture payments (inveteobjurgate upon $100 par compute) and after a while the indicated maturities:
     
    1. $97.25, 182 days.
       
    2. $95.75, 270 days.
       
    3. Calculate the bank allowance objurgate (DR) on each account (a and b) if it is held to ripeness. What is the equipollent give-in to ripeness (casually designated the tie- equipollent or coupon-equipollent give-in) on each of these Treasury Bills?
       
  3. First National Bank of Bannerville has posted concern revenues of $63 pet and concern costs from all of its borrowings of $42 pet. If this bank possesses $700 pet in whole earning effects, what is First National’s net concern latitude? Suppose the bank’s concern revenues and concern costs inclose,
     

 

  

while its earning effects growth by 50 percent. What obtain betide to its net concern latitude? 

  1. Commerce National Bank reports concern-impressible effects of $870 pet and concern-impressible liabilities of $625 pet during the future month. Is the bank asset impressible or amenability impressible? What is likely to betide to the bank’s net concern latitude if concern objurgates ascend? If they sink?
     
  2. A synod tie is vulgarly selling for $1,195 and pays $75 per year in concern for 14 years when it matures. If the ransom compute of this tie is $1,000, what is its give-in to ripeness if alienationd today for $1,195?
     
  3. Florida bank has the forthfuture poise quibble:
     

 

Assets 

Cash
Short-term securities Short-term advances Long-term fixed-objurgate advances Total 

Million $ 

$35
$200
$225
$250

$710 

Liabilities and Equity 

Demand deposits
Interest-bearing negotiation deposits Fed funds borrowings
Long-term fixed-objurgate borrowings Equity 

Million $ $240 $260 $25 $119 $66 $710 

 

Total (1) Calculate the bank’s one-year re-pricing gap. 

 

(2) Mete the collision on net pay when there is a 1 percent growth in objurgates. 16. Discuss shortcomings of re-pricing gap. 

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