The document provides information about a finance class, including contact details for professors, reading materials, and an overview of yield curve concepts. Key topics covered include:
1) Details on yield to maturity (YTM), spot rates, and forward rates and how they relate to the yield curve.
2) Theories explaining the shape of the yield curve such as expectations theory and liquidity preference theory.
3) How the yield curve can provide insights into economic conditions and expectations of future interest rates and inflation.
In this issue of Math in the News we look at Treasury Bonds, Notes, and other securities, since these are primary means that the U.S. govt. uses to raise cash.
For more media resources, go to http://www.media4math.com.
In this issue of Math in the News we look at Treasury Bonds, Notes, and other securities, since these are primary means that the U.S. govt. uses to raise cash.
For more media resources, go to http://www.media4math.com.
Time value of money is one of the key concept of finance. This presentation includes a basic idea about the time value of money, its significance with a practical problem
Time value of money is one of the key concept of finance. This presentation includes a basic idea about the time value of money, its significance with a practical problem
GEORGE MASON UNIVERSITYSchool of ManagementEMBA 703 Financia.docxbudbarber38650
GEORGE MASON UNIVERSITY
School of Management
EMBA 703 Financial Markets
Dr. Hanweck
Final Examination
Fall 2013
NAME: ___________________________________
G-code: _____________________________
Answer all questions. Place your answer to each question on a separate sheet of paper. Please write your name on the top left corner of each page. Document your answers and show your work. Read each question carefully and answer all parts. Try and answer something on each question. Your guess may turn out to be correct. The number in parentheses is the point weight for the question. Attach the exam to your answers.
(15)
1.(a)
Discuss various measures of capital market efficiency and how efficient capital markets contribute to the efficiency in the market for goods and services (including productive capital). As part of your discussion, consider the implications of the fact that the bulk of trading in capital markets is in outstanding securities and analyze the meaning of the terms "depth," "breadth," and "resiliency" as descriptions of capital markets. Include in your discussion the types of legislative and regulatory reforms that might be or have recently been instituted in order to improve the efficiency of capital markets and the role of "insider trading" and the SEC as they affect market efficiency.
(b)
Compare money and capital markets and identify the major issuers of securities in the different markets and the difference among the various types of securities within and between each of the markets. Within your discussion of the money markets include a consideration of the role of the Federal Reserve System (Fed) and the banking system as they interact through required reserve maintenance, needs for liquidity and monetary policy actions by the Fed. Consider in your analysis the types and significance of the links between the money and capital markets via the term structure of interest rates, issuers of debt and equity and the presence of interest rate and credit risk derivatives.
(10)
2. There are a number of theories of the term structure of interest rates including the unbiased expectations hypothesis, preferred habitat hypothesis, and market segmentation hypothesis. Discuss the implications of the unbiased expectations hypothesis within the context of the following problem. Problem 1: For a two year, default free, zero coupon security, compute its yield to maturity and draw the respective yield curves assuming two different expectations of inflation employing the Fisher Effect and the data below: (a) 4 percent one year from now, and (b) 2 percent one year from now. In addition, define and compute the implied forward yield on a one year security one year from now, assuming the current two year yield is 6.0 percent. Discuss the assumptions underlying this calculation and how it can be used to evaluate the implied forward yield on a 1-year loan, next year. (c) Wh.
Management of funds is a critical aspect of financial management. Management of funds acts as the foremost concern whether it is in a business undertaking or in an educational institution. Financial management, which is simply meant dealing with management of money matters.
Financial Management is efficient use of economic resources namely capital funds. Financial management is concerned with the managerial decisions that result in the acquisition and financing of short term and long term credits for the firm. Here it deals with the situations that require selection of specific assets, or a combination of assets and the selection of specific problem of size and growth of an enterprise. Herein the analysis deals with the expected inflows and outflows of funds and their effect on managerial objectives. In short, Financial Management deals with Procurement of funds and their effective utilization in the business.Management of funds is a critical aspect of financial management. Management of funds acts as the foremost concern whether it is in a business undertaking or in an educational institution. Financial management, which is simply meant dealing with management of money matters.
Financial Management is efficient use of economic resources namely capital funds. Financial management is concerned with the managerial decisions that result in the acquisition and financing of short term and long term credits for the firm. Here it deals with the situations that require selection of specific assets, or a combination of assets and the selection of specific problem of size and growth of an enterprise. Herein the analysis deals with the expected inflows and outflows of funds and their effect on managerial objectives. In short, Financial Management deals with Procurement of funds and their effective utilization in the business.
Management of funds is a critical aspect of financial management. Management of funds acts as the foremost concern whether it is in a business undertaking or in an educational institution. Financial management, which is simply meant dealing with management of money matters.
Financial Management is efficient use of economic resources namely capital funds. Financial management is concerned with the managerial decisions that result in the acquisition and financing of short term and long term credits for the firm. Here it deals with the situations that require selection of specific assets, or a combination of assets and the selection of specific problem of size and growth of an enterprise. Herein the analysis deals with the expected inflows and outflows of funds and their effect on managerial objectives. In short, Financial Management deals with Procurement of funds and their effective utilization in the business.
Management of funds is a critical aspect of financial management. Management of funds acts as the foremost concern whether it is in a business undertaking or in an educational institution. Financial management, Management of fund
QUESTION 1 ● When interest rate changes, the impact on a b.docxpoulterbarbara
QUESTION 1
● When interest rate changes, the impact on a bank’s earnings depends on the repricing of
their assets or liabilities.
2.
Loan A (7%, 1 year) = $100 Deposit A (2.5%, 3 months) = $250
Loan B (10%, 2 years) = $200 Deposit B (5%, 1 year) = $ 50
Total Assets = $300 Total Liabilities = $300
The net interest margin or spread
1
2
3
4
5
6
7
8
9
1
1 points
QUESTION 2
1. The average maturity of its assets is larger than that of its deposits, as is typical of most banks.
There is a
reinvestment
risk
re-finance
risk
re-pricing risk
default risk
1 points
QUESTION 3
1. The average duration of its assets is longer than that of its liabilities. There is a
reinvestment
risk
re-finance
risk
re-pricing risk
basis point
risk
1 points
QUESTION 4
1. If the loan interest rate adjusts every quarter and the deposit interest rate adjust every six
months, the risk of interest rate from the different frequencies of rate adjustments is called
Repricing
risk
yield -curve
risk
basis point
risk
default risk
1 points
QUESTION 5
1. If the loan interest rate is 4 % mark-up on the 6 month treasury bill and the deposit interest rate is
1% mark-up on the 3 month treasury bill, the risk of interest rate like this is called
Repricing
risk
yield -curve
risk
basis point
risk
default risk
1 points
QUESTION 6
1. Consider a bank that borrows $100 million in deposits at a floating rate of T-Bill plus 2% and
lends at LIBOR plus 4%. Both rates are reset semi-annually. Normally, both rates move together. Assume
the 3-month LIBOR rate was 3.40% and the 3-month T-Bill rate was 3.0% when the loan was disbursed.
The spread is given as follows
1
2
3
4
1 points
QUESTION 7
1. Assume a bank has the following balance sheet. Determine the 2-year GAP.
Asset Amou
n
t
Liability Amoun
t
Cash $100 90-day
CDs
$100
6-month
Gbo
nds
$400 360-day
CDs
$200
2-year
commer
cial
loans
$400 Time
Deposi
ts 2-
year
$900
5-year
fixed
rate
loan
s
$500 Stockholde
r’
s equity
$200
Total $1,40
0
Total $1,400
2.
GAP = (RSA2 yr – RSL2 yr)
0
-
-
-
-
1 points
QUESTION 8
1. Assume a bank has the following balance sheet. When both the deposit rate and loan rate
change by 2%, determine the 1-year net impact on net interest income (ΔNII)
Asset Amou
n
t
Liability Amoun
t
Cash $100 90-day
CDs
$100
6-month
Gbo
nds
$400 360-day
CDs
$200
2-year
commer
cial
loans
$400 Time
Deposi
ts 2-
year
$900
5-year
fixed
rate
loan
s
$500 Stockholde
r’
s equity
$200
Total $1,40
0
Total $1,400
2.
ΔNII = (RSA1-year – RSL1-year)* (.02)
1 points
QUESTION 9
1. Assume .
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Session Overview
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Orchestrator execution result
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6. BIBLIOGRAFIA Investments . William Sharpe, Gordon Alexander, J. Bailey. Prentice Hall. 6th Ed. Chapter 5: Page 108 - 138. Foundations of Financial Markets and Institutions . Frank Fabozzi, Franco Modigliani, Michael Ferri. Prentice Hall. 2nd Edition. ISBN 0-13-86056-7. Ch 12 The Term Structure of Interest Rates. Pg 223. Brealey & Myers . Chapter 23 Valuing Debt. ó Capítulo 21 Valoración de los diferentes tipos de deuda
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