Solution Manual For Bank Management & Financial Services 8th. Edition by Peter S. Rose, Sylvia C. Hudgins | 2009000140 | Holooly

Solution Manual For Bank Management & Financial Services [EXP-18700]

571 SOLVED PROBLEMS

Question: 10.P.1

A 10-year U.S. Treasury bond with a par value of $1000 is currently for $1015 from various security dealers. The bond carries a 7.5-percent coupon rate with payments made annually. If purchased today and held to maturity, what is its expected yield to maturity?

Verified Answer:

(Hint - the following relationships can help in so...

Question: 12.7

A bank determines from an analysis of its cost-accounting figures that for each $500 minimum-balance checking account it sells account processing and other operating costs will average $4.87 per month and overhead expenses will run an average of $1.21 per month. The bank hopes to achieve a profit

Verified Answer:

The relevant formula is: Unit Price Charged...

Question: 6.8

A bank estimates that its total revenues will amount to $155 million and its total expenses (including taxes) will equal $107 million this year. Its liabilities total $4,960 million while its equity capital amounts to $52 million. What is the bank’s return on assets? Is this ROA high or low? How

Verified Answer:

The bank's return on assets would be: [late...

Question: 8.P.13

A bank is considering the use of options to deal with a serious funding cost problem. Deposit interest rates have been rising for six months, currently averaging 5 percent, and are expected to climb as high as 6.75 percent over the next 90 days. The bank plans to issue $60 million in new money

Verified Answer:

You are trying to protect the bank against rising ...

Question: 6.18

A bank reports that the total amount of its net loans and leases outstanding is $936 million, its assets total $1,324 million, its equity capital amounts to $110 million, and it holds $1,150 million in deposits, all expressed in book value. The estimated market values of the bank’s total assets and

Verified Answer:

\frac{\text { Net Loans and Leases }}{\text...

Question: 15.12

A bank reports the following items on its latest balance sheet: allowance for loan and lease losses, $42 million; undivided profits, $81 million; subordinated debt capital, $3 million; common stock and surplus, $27 million; equity notes, $2 million; minority interest in subsidiaries, $4 million;

Verified Answer:

The Tier 1 capital items include: The Tier 2 capit...

Question: 10.P.11

A bank’s economic department has just forecast accelerated growth in the economy with GDP expected to grow at a 4.5 percent annual growth rate for at least the next two years. What are the implications of this economic forecast for an investment officer? What types of securities should the officer

Verified Answer:

This economic forecast suggests that the current y...

Question: 10.22

A bond currently sells for $950 based on a par value of $1,000 and promises $100 in interest for three years before being retired. Yields to maturity on comparable-quality securities are currently at 12 percent. What is the bond’s duration? Suppose interest rates in the market fall to 10 percent.

Verified Answer:

Present Present Value Value of Weight Year C...

Question: 10.P.9

A bond possesses a duration of 7.68 years. Suppose that market interest rates on comparable bonds were 7 percent this morning, but have now shifted upward to 7.25 percent. What percentage change in the bond’s value occurred when interest rates increased by 25 basis points?

Verified Answer:

\text { Percent Change in Value }=-7.68\lef...

Question: 14.P.2

A commercial bank decides to expand its service menu to include the underwriting of new security offerings (i.e. investment banking) as well as offering traditional lending and deposit services. It discovers that the expected return and risk associated with these two sets of service offerings are

Verified Answer:

Expected return - traditional services 3.5% Expe...

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