Title The Fed sells $1 million in bonds to a bond dealer. The bond dealer's bank experiences Question 2... Description The Fed sells $1 million in bonds to a bond dealer. The bond dealer's bank experiences Question 2 options: A) a decrease in assets of $1 million as its reserves decrease and a decrease in liabilities of $1 million as its deposits fall. B) an increase in assets of $1 million as its deposits fell by $1 million, and a decrease in liabilities as its reserves fell by $1 million. C) no change in assets or liabilities. D) a decrease in assets of $1 million as its reserves decrease and an increase in liabilities of $1 million as its deposits rise.
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- The Titan retires a $24.9 million bond tssue when the carrying value of the bonds is $22.5 million, but the market value of the bonds Is $28.0 millon. The entry to record the retirement will Include: Multiple Choice No gain or loss on retirement. A debit of $55 million to a loss account A credit of S5.5 milion to a gain account A credit to cash for $225 million. Ps Ps 40% 99+ Type here to search ** *** PrISc F10 F9 F11 F12 F4 RI & 4 . 6. 7 8 T. P F K B N |組Assume there are five default-free bonds with the following cash flows: Bond Price today Cash Flows Year 1 $50 $200 A $48 $1265 BCDE Year 2 $94.5 $45.5 $912 $1200 $100 $50 $50 Assume that you are financially constrained and can use up to $1300 to invest initially. The arbitrage profit you can make by trading those bonds is the closest to: Year 3 A) $94 B) $33 C) Cannot be calculated on the basis of this information D) $61 Year 4 $50 $50 $1050 O,As you confirmed there are errors in the solutions.Can you please provide clear answers for B,C,D. Question 3. Bond Consider a bank with the following balance sheet (M means million): Assets Value Duration of the Asset Convexity of the Asset5yr bond bought at a yield of 3.4% (lending money) $550M 4.56212.02612yr bond bought at a yield of 4% (lending money) $800M 9.45353.565 Liabilities Value Duration of the Liability Convexity of the Liability2yr bond sold at a yield of 2.4% (borrowing money) $300M 1.941 2.3844yr bond sold at a yield of 2.8% (borrowing money) $500M 3.759 8.206 a) Calculate the equity (total asset – total liability) to asset ratio of the bank (Hint: equity to asset ratio = total equity/total asset) b) Calculate the duration and convexity of the both asset and liability sides; c) If the interest rates go up by 1%, using the duration and convexity rule to determine the net worth of the bank and the equity to asset ratio; d) In c)’s scenario, to maintain the equity to…
- Question 3. Bond Consider a bank with the following balance sheet (M means million): Assets 5yr bond bought at a yield of 3.4% (lending money) 12yr bond bought at a yield of 4% (lending money) Liabilities 2yr bond sold at a yield of 2.4% (borrowing money) 4yr bond sold at a yield of 2.8% (borrowing money) Value $550M $800M Duration of the Asset 4.562 9.453 Convexity of the Asset 12.026 53.565 Convexity of the Liability 2.384 8.206 Value$300M 1.941 Duration of the Liability $500M 3.759 1) If the interest rates go up by 1%, using the duration and convexity rule to determine the net worth of the bank and the equity to asset ratio 2)In 1)‘s scenario, to maintain the equity to asset ratio at 40% which is required by the regulation, the bank decides to raise cash (zero duration and zero convexity) from the equity holders. How much cash does the bank need to raise? 3)Do you agree with the following statement? Explain why. “The information about a bond’s…Question 3. Bond Consider a bank with the following balance sheet (M means million): Assets 5yr bond bought at a yield of 3.4% (lending money) 12yr bond bought at a yield of 4% (lending money) Liabilities 2yr bond sold at a yield of 2.4% (borrowing money) 4yr bond sold at a yield of 2.8% (borrowing money) Value $550M $800M Duration of the Asset 4.562 9.453 Convexity of the Asset 12.026 53.565 Convexity of the Liability 2.384 8.206 Value$300M 1.941 Duration of the Liability $500M 3.759 a) Calculate the equity (total asset – total liability) to asset ratio of the bank (Hint: equity to asset ratio = total equity/total asset) b) Calculate the duration and convexity of the both asset and liability sides; c) If the interest rates go up by 1%, using the duration and convexity rule to determine the net worth of the bank and the equity to asset ratio; d) In c)’s scenario, to maintain the equity to asset ratio at 40% which is required by the…Please question A B and C is required Bond Consider a bank with the following balance sheet (M means million): Assets Value Duration of the Asset Convexity of the Asset 5yr bond bought at a yield of 3.4% (lending money) $550M 4.562 12.026 12yr bond bought at a yield of 4% (lending money) $800M 9.453 53.565 Liabilities Value Duration of the Liability Convexity of the Liability 2yr bond sold at a yield of 2.4% (borrowing money) $300M 1.941 2.384 4yr bond sold at a yield of 2.8% (borrowing money) $500M 3.759 8.206 a) Calculate the equity (total asset – total liability) to asset ratio of the bank (Hint: equity to asset ratio = total equity/total asset) b) Calculate the duration and convexity of the both asset and liability sides; c) If the interest rates go up by 1%, using the duration and convexity rule to determine the net worth of the bank and the equity to asset ratio;
- Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $15,500. If the issuing corporation redeems the bonds at 98 1/2, what is the amount of gain or loss on redemption? a. $500 loss Ob. $15,500 gain Oc. $500 gain Od. $15,500 loss 43 0 7777777777720. The computer of your neighbor, who is an accountant, was hacked by mystical creatures. Your neighbor needs your help in reconstructing the amortization table for his company's investment in 3-year bonds: A D. E 1. Date Interest received Interest income Amortization Present valkue 2. 1/1/x1 3 12/31/x1 280,000 2,067,602 4. 12/31/x2 31,888 2,035,714 12/31/x3 280,000 244,286 How much is the face amount of the bonds and what is the effective interest rate? a. 2,096,073; 12% b. 2,000,000; 12% c. 2,071,428; 14% d. I don't know. My brain is hacked too!OQuestion A, B and C is required. Question 3. Bond Consider a bank with the following balance sheet (M means million):AssetsValueDuration of the AssetConvexity of the Asset5yr bond bought at a yield of 3.4% (lending money)$550M4.562 12.026 12yr bond bought at a yield of 4% (lending money)$800M9.453 53.565 LiabilitiesValueDuration of the LiabilityConvexity of the Liability2yr bond sold at a yield of 2.4% (borrowing money)$300M1.9412.3844yr bond sold at a yield of 2.8% (borrowing money)$500M3.7598.206a) Calculate the equity (total asset – total liability) to asset ratio of the bank(Hint: equity to asset ratio = total equity/total asset) b) Calculate the duration and convexity of the both asset and liability sides; c) If the interest rates go up by 1%, using the duration and convexity rule to determine the net worth of the bank and the equity to asset ratio;
- Can you pleas provide clear answers for B, convexity and duration.Thank you for your time. Question 3. Bond Consider a bank with the following balance sheet (M means million): Assets Value Duration of the Asset Convexity of the Asset5yr bond bought at a yield of 3.4% (lending money) $550M 4.56212.02612yr bond bought at a yield of 4% (lending money) $800M 9.45353.565 Liabilities Value Duration of the Liability Convexity of the Liability2yr bond sold at a yield of 2.4% (borrowing money) $300M 1.941 2.3844yr bond sold at a yield of 2.8% (borrowing money) $500M 3.759 8.206 a) Calculate the equity (total asset – total liability) to asset ratio of the bank (Hint: equity to asset ratio = total equity/total asset) b) Calculate the duration and convexity of the both asset and liability sides;A) You invest OMR 900 in a bond which gives 9% interest over a period of 2 years, the compounding is done quarterly. How much will be the value of the investment? Select one: a. 1053.24 b. 1254.74 c. 1075.34 d. 753.24 B) Which of the statements are not correct Select one: a. Profits refers to earnings before Interest and Taxes b. Investment decisions relate to pattern of financing c. Dividend pay out ratio refers to what proportion is paid to shareholders d. Borrowed funds are relatively cheaper than shareholders’ funds3. Assume you purchased a bond for $9,186. The bond pays $300 interest every six months. You sell the bond after 18 months for $10,000. Calculate the following: a. Income. b. Capital gain (or loss). c. Total return in dollars and as a percentage of the original investment. Review Only Click the icon to see the Worked Solution. a. The current income is $ (Round to the nearest dollar.) b. The capital gain (or loss) is $ (Enter a loss as a negative number and round to the nearest dollar.) c. The total return in dollars is $ (Round to the nearest dollar.) The total return as a percentage of the original investment is %. (Enter as a percentage and round to two decimal places.)