The central bank policy rate is one of the monetary tools used to regulate liquidity in...
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The central bank policy rate is one of the monetary tools used to regulate liquidity in an economy. The role of the regulator, the central bank, is to serve the public interest of the economy by maintaining financial and price stability. One of the tools for achieving this objective requires that the central bank or regulator set policies that control the transmission mechanism of short-term interest rates, particularly the monetary policy channels of short-term interest rates. Commercial banks play an intermediary role by borrowing at a rate from the central bank and lending it to individuals and organizations. The public usually has to borrow from commercial banks to finance projects and programs for which they do not have sufficient savings. Notwithstanding the fact that there are other financing options available to the public, the primary source of finance in Ghana recently has been through bank loans. Such loans come at a cost higher than the price at which the commercial banks borrowed from the central bank. The Ghana Reference Rate (GRR) was introduced by the Bank of Ghana in consultation with the Ghana Association of Bankers to replace the base rate model that was previously implemented by the universal banks. The GRR is a benchmark interest rate used in Ghana's banking industry. It is a weighted average of the interest rates of the 91-day, 182-day, and 1-year government of Ghana treasury bills, which are considered risk-free investments. A bank's risk premium is either added to or subtracted from the GRR to determine the price of its loans. This implies that borrowers would be charged a particular rate of interest above the base rate for borrowing from any commercial bank. Financial Reporting and Financial Market Analysis You are the financial analyst for your company. Your company wants to acquire a property to expand its operations. Assume you advise your company to borrow from the bank to be able to acquire the property. What will be the borrowing rate the bank charges your company for borrowing? Required: Download or obtain a recent financial statement (within the past 5 years) of any bank (in Ghana) of your choice. With your knowledge of strategic finance issues and the principle of financial statement analysis, provide a brief (general) report on the financial performance of the selected bank using its financial statement, and use the information from the financial statement as well as macro-economic policy indicators to estimate the Ghana Reference Rate. The central bank policy rate is one of the monetary tools used to regulate liquidity in an economy. The role of the regulator, the central bank, is to serve the public interest of the economy by maintaining financial and price stability. One of the tools for achieving this objective requires that the central bank or regulator set policies that control the transmission mechanism of short-term interest rates, particularly the monetary policy channels of short-term interest rates. Commercial banks play an intermediary role by borrowing at a rate from the central bank and lending it to individuals and organizations. The public usually has to borrow from commercial banks to finance projects and programs for which they do not have sufficient savings. Notwithstanding the fact that there are other financing options available to the public, the primary source of finance in Ghana recently has been through bank loans. Such loans come at a cost higher than the price at which the commercial banks borrowed from the central bank. The Ghana Reference Rate (GRR) was introduced by the Bank of Ghana in consultation with the Ghana Association of Bankers to replace the base rate model that was previously implemented by the universal banks. The GRR is a benchmark interest rate used in Ghana's banking industry. It is a weighted average of the interest rates of the 91-day, 182-day, and 1-year government of Ghana treasury bills, which are considered risk-free investments. A bank's risk premium is either added to or subtracted from the GRR to determine the price of its loans. This implies that borrowers would be charged a particular rate of interest above the base rate for borrowing from any commercial bank. Financial Reporting and Financial Market Analysis You are the financial analyst for your company. Your company wants to acquire a property to expand its operations. Assume you advise your company to borrow from the bank to be able to acquire the property. What will be the borrowing rate the bank charges your company for borrowing? Required: Download or obtain a recent financial statement (within the past 5 years) of any bank (in Ghana) of your choice. With your knowledge of strategic finance issues and the principle of financial statement analysis, provide a brief (general) report on the financial performance of the selected bank using its financial statement, and use the information from the financial statement as well as macro-economic policy indicators to estimate the Ghana Reference Rate.
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It seems you are dealing with a task that involves analyzing a banks financial statements to estimate a borrowing rate for a company planning to acquire property This task requires a combination of fi... View the full answer
Related Book For
International Economics Theory and Policy
ISBN: 978-0273754206
9th Edition
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
Posted Date:
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