(Solution) If Stored Liquidity Is Used By A DI To Fund An Exercised Loan Commitment (Points : 2) The Balance Sheet Will Decrease By The Amount Of The New Loan.... | Snapessays.com


(Solution) If stored liquidity is used by a DI to fund an exercised loan commitment (Points : 2) the balance sheet will decrease by the amount of the new loan....


1. If stored liquidity is used by a DI to fund an exercised loan commitment (Points : 2)

 

the balance sheet will decrease by the amount of the new loan.

 

only the asset side of the balance sheet will increase.

 

the balance sheet will increase by the amount of the new loan.

 

there will be no effect on the balance sheet.

 

 

 

2. Which of the following best describes X-inefficiencies? (Points : 2)

 

The average cost of production decreases as the level of output increases.

 

The effects on costs related to managerial ability and other hard-to-quantify factors.

 

Cost savings are realized from using many of the same inputs to produce multiple products.

 

The average cost of production increases as the level of output increases.

 

 

 

3. Which of the following occur when managers undertake growth-oriented investments to increase an FI's size that may be inconsistent with stockholders' value-maximizing objectives? (Points : 2)

 

Technology risk.

 

Operational efficiency.

 

Agency conflicts.

 

Diseconomies of scale.

 

 

 

4. Settlement risk is important because (Points : 2)

 

of the interdependent nature of many international transactions.

 

of the impact on sovereign country risk.

 

problems may induce countries to limit the freedom of international capital flows.

 

the electronic funds transfer network itself may become insolvent.

 

 

 

5. A disadvantage of using liability management to manage a FI's liquidity risk is (Points : 2)

 

the resulting shrinkage of the FI's balance sheet.

 

the high cost of purchased liabilities.

 

the accessibility of international money markets.

 

tax considerations.

 

 

 

6. What is a fire-sale price? (Points : 2)

 

Market value of an asset.

 

Price received for an asset that has to be liquidated immediately.

 

Maximum price that will be received on sale of an asset irrespective of the time of sale.

 

Replacement value of an asset.

 

 

 

7. What are the possible ways that the bank can meet an expected net deposit drain of +4 percent using purchased liquidity management techniques? (Points : 2)

 

Utilize further the Fed funds market.

 

Utilize repurchase agreements.

 

Liquidate all cash holdings.

 

Answers A and B only.

 

 

 

8. A new computer system is expected to cost $40 million and generate annual savings of $12 million over the next five years.

 

 

Should the bank invest in this project if the discount rate is 12 percent? (Points : 2)

 

Yes, because the net present value of the project is $3,260,000.

 

No, because the net present value of the project is -$3,260,000.

 

Yes, because the net present value of the project is $20 million.

 

No, because the net present value of the project is -$20 million.

 

 

 

9. A new computer system is expected to cost $40 million and generate annual savings of $12 million over the next five years.

 

 

Should the bank invest in this project if the discount rate is 18 percent? (Points : 2)

 

Yes, because the net present value of the project is $2,476,000.

 

No, because the net present value of the project is -$2,476,000.

 

Yes, because the net present value of the project is $24.8 million.

 

No, because the net present value of the project is -$24.8 million.

 

 

 

10. A new computer system is expected to cost $40 million and generate annual savings of $12 million over the next five years.

 

 

What is the IRR for this investment?

 

 

Year

 

 

0

 

 

1

 

 

2

 

 

3

 

 

4

 

 

Cash Flows

 

 

-40000000

 

 

12000000

 

 

12000000

 

 

12000000

 

 

12000000

 

 

 

(Points : 2)

 

11.18 percent.

 

12.98 percent.

 

15.24 percent.

 

12.00 percent.

 


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This question was answered on: May 23, 2022

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