Question: If a bank increases its maturity mismatch what happens to
If a bank increases its maturity mismatch, what happens to its economic spread before taxes and its economic spread after taxes (i.e., including the tax penalty)?
Answer to relevant QuestionsWhat is the relationship between the stock market and the real economy in terms of measures such as gross domestic product (GDP), inflation, and interest rates? How does return on invested capital (ROIC) affect a company’s cash flow? Explain the relationship between ROIC, growth, and cash flow. What is the total returns to shareholders (TRS) figure and why is it important? Why do companies operating within the pharmaceutical and biotechnology industries typically sustain higher ROICs than firms in the technology, hardware, and equipment industries? If a bank attracts new equity to increase its Tier 1 capital ratio, what happens to its cost of equity and its intrinsic value if it invests the new equity capital in (1) deposits with the central bank, or (2) a broad equity ...
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