A bank’s economics 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 investments officer? What types of securities should the officer think most seriously about adding to the investment portfolio? Why? Suppose the bank holds a security portfolio similar to that described in Table 10-3 for all insured U.S. banks. Which types of securities might the investments officer want to think seriously about selling if the projected economic expansion takes place? What losses might occur and how could these losses be minimized?
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