The RBA decides to buy bonds and securities from commercial banks on the open market. Other things being equal, this will result in a(n) _________ in the price of financial assets. short term increase, but longer-term fall increase decrease short term decrease, but longer-term rise no change
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The RBA decides to buy bonds and securities from commercial banks on the open market. Other things being equal, this will result in a(n) _________ in the price of financial assets.
|
short term increase, but longer-term fall |
||
|
increase |
||
|
decrease |
||
|
short term decrease, but longer-term rise |
||
|
no change |
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- Banks use gap analysis to measure interest rate risk in their balance sheets. If firm XYZ is said to have a positive gap, this means: Group of answer choices C. Rate-sensitive assets exceed rate-sensitive liabilities B. Long-term assets are funded with short-term liabilities D. Rate-sensitive assets equal rate-sensitive liabilities A. Liabilities reprice before assetsEconomic conditions in Fredland have caused the demand for money to increase which has changed the nominal interest rate. If the central bank wants to counteract this change, which of the following is an appropriate open market operation to achieve that? Select one: O a. Raise the discount rate. O b. Increase taxes. O c. Decrease the reserve requirement. O d. Sell bonds. O e. Buy bonds.Finance Political stability is a major factor of which one of the following? business risk inflation risk country risk exchange rate risk 2. Regarding short selling: which one of the following statements is incorrect? Dividends on any stock sold short must be covered by the short seller. There is no time limit on a short sale. Short sales are permitted only on falling prices or a downtick. Short sellers must put up margin as if they had gone long.
- Suppose interest rates in the economy increase. How would such a change affect the costs of both debt and common equity based on the CAPM?In a CDO structure, when economic condition turns out to be better than previously expected, the cash flow from the pool of underlying assets (such as mortgage loans or consumer loans) is more than the level reflected in the original(previous) pricing of the tranches. In this scenario, which tranche’ rate of return will turn out to be higher than others? → (1) Senior tranche; (2) Mezzanine tranche; (3) Junior tranche;2. The Trade-Off Model A. "The trade-off model of debt financing implies that an increase in the interest rate on debt will cause the level of debt to decline." Do you agree or disagree? Please explain. B. Discuss the likely effects of an increase in uncertainty about cash flows on the responsiveness of a firm's debt level to changes in the interest rate on debt.
- If a bank has a positive repricing gap (RSAs > RSLs), then: Does this bank have reinvestment or refinancing risk? If interest rates increase, net interest income will: A. Reinvestment risk, increase B. Reinvestment risk, decrease C. Refinancing risk, increase D. Refinancing risk, decreaseWhich of the following statements is true? A. The percentage decrease in value when the yield-to-maturity (YTM) increases by a given amount is smaller than the increase in value when the yield-to-maturity (YTM) decreases by the same amount. B. Ratio analysis expands GAP analysis to focus on the sensitivity of bank profits across different interest rate environments. C. The repurchase price is smaller than the selling price and accounts for the interest charged by the buyer, who is lending funds to the seller with the security as collateral. D. The issuers or the firms issuing the bonds are rated on their junior unsecured debt.Suppose that the Fed wants to lower long-term interest rates and buys all the Treasury securities banks hold. Reflect those changes on the balance sheet (commitment to low long term interest rate environment, QE)
- Increasing a country's risk-free rate could _______ the cost of equity to an MNC in that country; increasing a country's risk-free rate could ________ the cost of debt to an MNC in that country, assuming that the other things held constant. A. increases; not affect B. not affect; increase C. increase; increase D. not affect; not affectWhich of coming up next isn't a money outpouring? a) Increase in Prepaid costs b) Increase in debt holders c) Increase in stock d) Increase in lendersWhich of the following would NOT improve the current ratio? Borrow short term to finance additional fixed assets Issue long-term debt to buy inventory Sell equity shares to reduce current liabilities Sell fixed assets to reduce accounts payable