“Banks will always prefer a low to high capital-to-asset ratio.” Do you agree or disagree with this statement. Explain your answer. A numerical example will help in answering this question.
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“Banks will always prefer a low to high capital-to-asset ratio.” Do you agree or disagree with this statement. Explain your answer. A numerical example will help in answering this question.
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- Why is capital adequacy more of a problem for commercial banks than for most other businesses?Should determining whether a bank has adequate capital be done internally or externally?During the 2007-2009 period, the US government made its most dramatic interventions in financial markets since the 1930s. It has been argued that the current crisis could redraw the boundaries between government and markets. For some, “freer and more flexible markets will still do more for the world economy than the heavy hand of government” whereas for others “big banking crises are ultimately solved by early and decisive government action and financial regulation.” Evaluate these positions.
- What has happened to the profitability of financial firms in the US economy in recent decades? Why have they been able to increase their profits? Is this a good thing for the US economy as a whole?The following are the common characteristics of financial intermediaries, except: *a. Providers of loans.b. Maintains stability in the capital market.c. Making the investors rich.d. Providing investment adviceExplain the answer and/or show any calculation to prove the answer. When the central bank of Guilder sells bonds, which of the following will occur?
- Why are companies' liquidity ratios calculated?During the recession of 2008, it was suggested that some banks were “too big to fail” (TBTF). Under this premise, a large bank or financial institution that engages in illegal activity may not be severely punished or have its officials charged with criminal activity. Why?Would the interest rate increase be more likely to hurt or help the financial institution’s profitability?
- discuss three ways in which banks are to make profitQ1. The importance of studying financial markets and financial institutions for the citizens. (self-framed 4 sentences)Explain how capital adequacy requirements may affect a commercial bank’s dividend payout and growth potential. If the bank anticipates a decrease in its capital adequacy ratio (capital to total asset ratio), what options are available to prevent the decline? What risks, if any, are there in each strategy? Use the following balance sheet to answer questions 5-8 ($000) Cash 21 Demand Deposits 550 Securities 369 Fed Funds (Borrowings) 151 Loans 400 Equity 89