Why have the use of standby credit letters grown in recent years? Answer The growth of bank loans sought by companies in recent years The decreased demand for risk reduction devices The high cost of standby credit letters in recent years The rapid growth of direct financing by companies All of the above

Why have the use of standby credit letters grown in recent years?
Answer

		The growth of bank loans sought by companies in recent years
		The decreased demand for risk reduction devices
		The high cost of standby credit letters in recent years
		The rapid growth of direct financing by companies
		All of the above

Answer
The rapid growth of direct financing by companies

A bank has placed 5000 consumer loans in a package to be securitized. These loans have an annual yield of 15.25 percent. This bank estimates that the securities on these loans are priced to yield 10.95 percent. The bank expects 1.45 percent of the loans will default. Underwriting and advisory services will cost .25 percent and a credit guarantee if more loans default than expected will cost .35 percent. What is the residual income from this loan securitization? Answer 3.70 percent 4.30 percent 2.25 percent 5.15 percent None of the above

A bank has placed 5000 consumer loans in a package to be securitized. These loans have an annual yield of 15.25 percent. This bank estimates that the securities on these loans are priced to yield 10.95 percent. The bank expects 1.45 percent of the loans will default. Underwriting and advisory services will cost .25 percent and a credit guarantee if more loans default than expected will cost .35 percent. What is the residual income from this loan securitization?
Answer

		3.70 percent
		4.30 percent
		2.25 percent
		5.15 percent
		None of the above

Answer

2.25 percent

The Evergreen Bank has purchased a bond that has a coupon rate of 5.5% and a face value of $1000. It has 11 years to maturity and is selling in the market for $887.52. The bond makes annual coupon payments. What is the yield to maturity on this bond? Answer 7% 5.5% 11% 4.70% None of the above

The Evergreen Bank has purchased a bond that has a coupon rate of 5.5% and a face value of $1000. It has 11 years to maturity and is selling in the market for $887.52. The bond makes annual coupon payments. What is the yield to maturity on this bond?
Answer

		7%
		5.5%
		11%
		4.70%
		None of the above

Answer
7%

A bank has an average asset duration of 5 years and an average liability duration of 9 years. This bank has total assets of $1000 million and total liabilities of $850 million. Currently, market interest rates are 5 percent. If interest rates rise by 2 percent (to 7 percent), what is this bank's duration gap? Answer -4 years 4 years 2.65 years -2.65 years 12.65 years

A bank has an average asset duration of 5 years and an average liability duration of 9 years. This bank has total assets of $1000 million and total liabilities of $850 million. Currently, market interest rates are 5 percent. If interest rates rise by 2 percent (to 7 percent), what is this bank's duration gap?
Answer

		-4 years
		4 years
		2.65 years
		-2.65 years
		12.65 years

Answer
-2.65 years

The Stuart State Bank has $1000 in total assets (all of which are earning assets), $700 of which will be repriced with in the next 90 days. This bank also has $800 in total liabilities, $400 of which will be repriced within the next 90 days. Currently, the bank is earning 8% on its assets and is paying 5% on its liabilities. What is the dollar interest-sensitive gap of this bank? Answer -$200 -$100 $200 $300 $600

The Stuart State Bank has $1000 in total assets (all of which are earning assets), $700 of which will be repriced with in the next 90 days. This bank also has $800 in total liabilities, $400 of which will be repriced within the next 90 days. Currently, the bank is earning 8% on its assets and is paying 5% on its liabilities. What is the dollar interest-sensitive gap of this bank?
Answer

		-$200
		-$100
		$200
		$300
		$600

Answer
$300

A bond has a face value of $1000 and coupon payments of $120 annually. This bond matures in three years and is selling in the market for $1160. Market interest rates are 6%. What is this bond's duration? Answer 3 years 5.71 years 1.96 years 2.71 years None of the above

A bond has a face value of $1000 and coupon payments of $120 annually. This bond matures in three years and is selling in the market for $1160. Market interest rates are 6%. What is this bond's duration?
Answer

		3 years
		5.71 years
		1.96 years
		2.71 years
		None of the above

Answer
2.71 years

The Evergreen Bank has purchased a bond that has a coupon rate of 5.5% and a face value of $1000. It has 11 years to maturity and is selling in the market for $887.52. The bond makes annual coupon payments. The Evergreen l Bank is planning on selling this bond at the end of 5 years for $1036.50. What is the holding period return on this bond? Answer 5.5% 7% 11% 9% None of the above

The Evergreen Bank has purchased a bond that has a coupon rate of 5.5% and a face value of $1000. It has 11 years to maturity and is selling in the market for $887.52. The bond makes annual coupon payments. The Evergreen l Bank is planning on selling this bond at the end of 5 years for $1036.50. What is the holding period return on this bond?
Answer

		5.5%
		7%
		11%
		9%
		None of the above

Answer
9%