FIND A SOLUTIONAT All A+ Essays
Question 1 : 8 points
Suppose the Bank of Canada made an announcement that it would
purchase up to $500 billion of long term Canada bonds over the
following six month. What effect might this policy has on the yield
curve? Explain in detail.During the current economic crisis caused
by the Coronavirus, what would you expect the yiedd curve to look
like? Upward sloping, flat, or inverted.Explain in detail.
Question 2 : 10 points
Assume Bank One has the following balance sheet items in
millions of dollars:
Rate sensitive Asset $20m
Rate sensitive Liabilities $50m
Fixed Rate Assets $80m
Fixed Rate Liablities $40m
Capital$10m
Also assume the duration of the assets is 2 years and that of
its liabilities is 3 years.
Assume that interest rates are initially 3%.
List the above information in a T account.What is the income
gap for the bank?What will happen to the income of the bank if
interest decreases by 1%? Explain using gap analysisIf the bank
sells $10m of its fixed rate assets and replaces them with rate
sensitive assets. What is the income gap for the bank?After event
(d) above, what will happen to the income of the bank if interest
increases by 1%? Explain using gap analysisIf interest increases
from 3% to4%calculate the change in the market value of the net
worth as a percentage of total assets.
Question 3: 8 points
Bank A has the following balance sheet as December 31 2019:
Reserves $5m
loans $40m
Deposits $35m
Capital $10m
Net profit of the bank is $1.5m
List the above information in a T account.Calculate the
return on assets, the return on equity, and the equity
multiplier.Additional deposits of 5m were added and 3m of loans
were offered to new clients. Reflect that in the T account and
recalculate thereturn on assets, the return on equity, and the
equity multiplier.After actions “b” above, would you be willing to
invest in this bank? Explain in detail.
Question 4: 8 points
Analyze each of the following statements and determine
whether it is True, False, or Uncertain. Marking will be based
entirely on the supporting arguments. Therefore, try to be thorough
in your answers and base your discussion on the theories that have
been reviewed in this course.
If the overnight rate is above its target for the day, the
Bank of Canada will enter into Special Purchase and Resale
Agreements (SPRAs) of sufficient volume to drive it down to its
target.Eurodollars are U.S. dollars issued by a European bankA bank
with a positive duration gap would experience a decrease in the
market value of networth with rising interest rates.For a given
maturity, high coupon bonds have higher price volatility than low
coupon bonds.If you deposit a $50 cheque in the bank, before the
cheque has cleared, the change in your bank’s balance sheet will be
a $50 increase in cash items in the process of collection and a $50
increase in chequable deposits.Last resort lending is no longer
needed because the presence of Canadian Depository Insurance
Corporation (CDIC) eliminates the presence of bank panics.The
supply curve for bonds has the usual upward slope, indicating that
as the price increases, other things equal, quantity supplied
increases.If a corporate bond becomes less liquid, the interest on
the bond will fall. As result of that interest rate of Government
of Canada bond will rise.Question 5: 8 points
The currency/deposit ratio (c) is 25% and the desired reserve
ratio (r) is 15%. Bank of Canada moves $200m dollars worth of
government deposits out of its books and into commercial banks.
Show the relevant accounting entries and indicate the size of
the effect on the money supply.Assume that the monetary base is
$20m. Calculate the money supply. Calculate the effect on the money
supply of a decrease in (c)to 10%What is the appropriate response
on the part of the central bank in order to offset the effects of
the decrease in the currency/deposit ratio?
Question 6 : 10 points
Bank A has the following balance sheet as at December 31
2019:
Reserves $20m
Securities $40m
Loans $140m
Deposits $150m
Capital $50m.
List the above in a T accountIf the required reserve is 10%
calculate the excess reserve, if anyA client withdrew $10m. reflect
this transation in the balance sheet. Calculate the new reserve.
How much is the excess reserve if any?If there is a reserve
deficiency show the possible actions of the bank and wich one is
most likely to take effect?Assume that one of the clients of bank
declared bankruptcy and $60m of loans were wiped out. Show the
change in the balance sheet. Comment generally on the overall bank
health.Question 7: 8 points
Assume that no banks hold excess reserves, and the public
holds no currency. If bank A sells a $100,000 security to the Bank
of Canada, explain what happens to this bank and two additional
steps in the deposit expansion process, assuming a 10 percent
reserve requirement. How much do deposits and loans increase for
the banking system when the process is completed?
Question 8: 8 points
You heard in the news that Bank of Canada has just lowered
the policy overnight rate to 0.25% due to the economic catastrophy
of Corornavirus.
Does this signal the Bank is moving to to more expansionary
or contractionary monetary policy? Explain in detail.In your
opinion why did the bank lowered the policy overnight rate?Question
9: 8 points
The Bank of Canada targests the value of overnight interest
rate within it operating band. Explain, in detail, the actions of
the Bank of Canada within the below two senarios:
If the overnight rate is trading above the target.If the
overnight rate is trading below the target.
Question 10: 8 points
Due to the current economic ciris caused by Corornvirus Bank
of Canada lowered the reference overnight rate to 0.25%. What is
the bank rate and what is the lending rate?In normal times, the
bank of Canada relies mainly on conventional monetary policy tool.
But in times of crises, like the one in scenario in (a) above,
convenestion monetary polic is not effective. In this case the Bank
will adhere to the tools of non-convestion monetary policy. Explain
in detail one of these tools.
Question 11: 8 points
The following is an extract of bonds from the Globe-investor
website. The extraction didn’t go very well because there are some
pricing errors. Without calculating the price of each bond,
indicate which prices seem to be reported incorrectly, and explain
why? All bonds have a face value of 100.
Bond
Price
CPN (%)
Yield (%)
A
96.7
3.00
1.04
B
102.3
4.00
0.9
C
106.12
2.00
2.62
D
102.5
2.5
1.40
E
110.15
2.5
3.06
F
118.67
8.4
3.53
Question 12: 8 points
The presence of asymmetric information in the financial
system leads to adverse selection and moral hazard. Eexplain in
detailwhat do we mean by asymmetric information, adverse selection
and moral hazard?How do you relate the government safety net “too
big to fail” to asymmetric information? Explain in detail.
READ ALSO ...
Throughout the desktop, tablet and mobile versions of the Coca
Cola website, as illustrated through the Figures above, numerous
images are used. Often websites will alter the images in some form
when transitioning from a desktop website to a mobile website. This
would be done to optimise the space of the screen and to simplify
the display, particularly in the mobile display where the screen
size is considerably smaller. In the Coca Cola website, the images
throughout the website have not changed amongst the transition from
desktop to mobile. To compensate, the images have been cropped so
to fit the screen. As observed from Figure 2.4.2, the image in the
top half of the screen has not changed but has simply been cropped
to the appropriate screen-size. Therefore, the website has kept the
website very consistent throughout the different displays and has
showed only very minimal changes in regard to hover functions and
images. 3 Conclusion Through the analysis of the purpose,
communication, navigation and mobile responsiveness in the Coca
Cola website, this report critiqued Coca Cola’s website as to
whether it was successful in these components. As stated
previously, the purpose of Coca Cola’s website was to advertise
their brand and to sell their drinks, ultimately maximising their
profit whilst upholding a long-term sustainable growth as a
world-wide beverage brand. Communication of the purpose through the
website has been done through a grid-based layout to separate the
various sections of the website. Through this, the website has also
achieved an aligned and straightened look, allowing for the
website’s content to be stacked neatly. By placing a hamburger
styled navigation icon in the top left-hand corner, the web>
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