Contrary to the exuberant economic forecast described in problem 11, suppose a bank’s economics department is forecasting a significant recession in economic activity. Output and employment are projected to decline significantly over the next 18 months. What are the implications of this forecast for an investment portfolio manager? What is the outlook for interest rates and inflation under the foregoing assumptions? What types of investment securities would you recommend as good additions to the portfolio during the period covered by the recession forecast and why? What other kinds of information would you like to have about the bank’s current balance sheet and earnings report in order to help you make the best quality decisions regarding the investment portfolio?
Answer to relevant QuestionsArrington Hills Savings Bank, a $3.5 billion asset institution, holds the investment portfolio outlined in the following table. This savings bank serves a rapidly growing money center into which substantial numbers of ...What are the principal differences among asset liquidity management, liability management, and balanced liquidity management?First National Bank posts the following balance sheet entries on today’s date: Net loans and leases, $3,502 million; cash and deposits held at other banks, $633 million; Federal funds sold, $48 million; U.S. government ...What are clearing balances? Of what benefit can clearing balances be to a depository that uses the Federal Reserve System’s check-clearing network?Using the following financial information for Wilson National Bank, calculate as many of the liquidity indicators discussed in this chapter for Wilson as you can. Do you detect any significant liquidity trends? Which trends ...
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