Questions and Answers of Financial Markets Institutions

What are the differences among T-bills, T-notes, and T-bonds?
What is the monthly payment on a $150,000, 15-year mortgage if the mortgage rate is 5.75 percent? 6.25 percent? 7.5 percent? 9 percent? Present Value $150,000 150,000 150,000 150,000 Periods 15 x
What is a bond indenture?
Which type of bond—a mortgage bond, a debenture, or a subordinated debenture—generally has thea. Highest cost to the bond issuer?b. Least risk to the bond holder?c. Highest yield to the bond
What are sovereign bonds?
What is the monthly payment on a $150,000, 30-year mortgage if the mortgage rate is 5.75 percent? 6.25 percent? 7.5 percent? 9 percent? Present Value $150,000 150,000 150,000 150,000 Periods 30 x
What is a pass-through security?
Suppose that on January 18, 2022, a U.S. firm plans to purchase 3 million euros’ (€) worth of French bonds from a French FI in one month’s time. The French FI wants payment in euros. Thus, the
What are limit up–limit down rules?
At the beginning of the quarter, you purchased a $100,000 Treasury bond futures contract for 108-12. Calculate the profit on the futures contract if the price at the end of the quarter is 106-16,
What are some reasons why interest rate parity may not hold in spite of the economic forces that should ensure the equilibrium relationship?
One form of the interest rate parity equation appears as 1 + rUSt = (1/St) × (1 + rUKt) × Ft where both the spot and forward rates are expressed in terms of dollars for pounds or direct exchange
What are the differences among a spot contract, a forward contract, and a futures contract?
When is a futures or option trader in a long versus a short position in the derivative contract?
What is a swap?
A commercial bank has fixed-rate, long-term loans in its asset portfolio and variable-rate CDs in its liability portfolio. Bank managers believe interest rates will increase in the future. What side
What is meant by the term depository institution? How does a depository institution differ from an industrial corporation?
Which commercial banks are experiencing the highest profitability? Which commercial banks are experiencing the lowest profitability?
What are the main advantages of being a member of the Federal Reserve System?
If we examine a typical bank’s asset portion of the balance sheet, how are the assets arranged in terms of expected return and liquidity?
How does a retail CD differ from a wholesale CD?
How does a bank’s annual net income compare with its annual cash flow?
If a bank’s asset utilization ratio increases, what will happen to its return on equity, all else constant?
Under the FDIC’s 2007 rulemaking, how is a Category I deposit insurance premium determined?
What regulatory agencies oversee deposit insurance services to savings institutions?
What does it mean when a savings institution is a mutual organization?
How has the savings institution industry performed over the last several decades?
How do credit unions differ from savings institutions?
How have local credit unions performed over the last several decades?
What has been the fastest-growing area of asset business for finance companies?
Why are finance companies less regulated than commercial banks?
What is a wholesale motor vehicle loan?
What benefits do mutual funds have for individual investors?
How have global mutual funds grown relative to U.S.-based mutual funds?
What was the motivation for the passage of ERISA?
Which country has the highest fintech adoption rate?
What were the supply factors that contributed to the recent emergence of fintechs?
What were the demand factors that contributed to the recent emergence of fintechs?
What is banking-as-a-service? How are banks embracing a platform-based business model?
What are four categories of fintech innovations according to the Basel Committee of Banking Supervision (BCBS)? Give specific examples for each category of innovations.
What is cryptocurrency? Explain how cryptocurrency differs from a crypto-asset.
What are peer-to-peer (P2P) payments? What P2P apps have you used recently?
Describe the advantages and disadvantages of incumbent banks compared to fintechs.
Describe the advantages and disadvantages of fintechs compared to incumbent banks.
What are the three purposes of money? Does cryptocurrency fulfill these purposes?
What is fiat currency? Is Bitcoin a fiat currency?
What are the risks associated with DLT?
What is a difference between Bitcoin and Ethereum?
What is crowdfunding? Have you used any crowdfunding apps recently?
Describe applications of Internet-of-things (IoT) in the financial services industry.
Explain one of the reasons high-frequency trading (HFT) has hit a speed bump. Do you think fintechs will experience the same difficulties HFT firms have experienced?
What is a fintech sandbox?
Explain the European Union’s General Data Protection Regulation (GDPR) and how it might benefit the fintechs.
Explain the European Union’s Payment Services Directive 2 (PSD2) and how it might benefit the fintechs.
Explain the European Union’s Open Banking standards and how they might benefit the fintechs.
What is fintech risk?
How does fintech risk differ from technology risk?
How does risk in fintech companies differ from that in traditional FIs?
What is convexity? Explain.
How do loan sales and securitization help an FI manage its interest rate and liquidity risk exposures?
Select a bank whose income statement data are available. Using recent income statement data about a commercial bank, assess its performance. How does the performance of this bank compare to the
Should members of Congress be allowed to set regulations on accounting and financial matters while receiving donations from related lobbying groups?
How have money market rates changes since the beginning of the semester? Consider the existing economic conditions. Do you think money market rates will increase or decrease during the semester?
Isolate the risk and advantages of an aggressive working capital policy that emphasizes short-term over long-term debt financing.
Differentiate receipts and disbursements.
Calculate the tax refund for a given loss.
Specify the components of the security market line.
Identify the features of common stock.
Illustrate the difference between cross-sectional and time series analysis.
List and contrast the sources of risk.
Differentiate an ordinary annuity from an annuity due.
Contrast compounding and discounting.
Differentiate the roles played by the two parties to a swap agreement.
Explain the roles of financial, currency, and stock index futures.
Illustrate how hedgers use futures contracts to reduce the risk of loss from fluctuations in prices.
Show how the use of margin leverages the potential return in a futures contract.
Demonstrate the role of margin requirements in the futures markets, and explain the phrase “marked to the market”.
Illustrate how speculators earn profits and sustain losses in the futures markets.
Contrast long and short positions in futures contracts.
List the features of futures contracts.
Identify the advantages associated with stock index options.
Contrast naked and covered call option writing.
Compare buying a stock and a call option.
Explain the relationship between the market price of a stock and the prices of put and call options.
Explain how options offer leverage.
Differentiate an option’s market value, intrinsic value, and time premium.
Go to the CBOE home page (www.cboe.com) and select an index option based on each of the following stock indexes: (1) the S&P 500, (2) the Russell 1000, and (3) the Dow Jones Industrial Average.
Describe the features of put and call options.
Describe the impact of capitalizing a lease on a firm’s balance sheet, its financial ratios, and the use of financial leverage.
Isolate the importance of an asset’s residual value to the lease-versus-buy decision.
Determine if a firm should lease or buy equipment.
Define a balloon payment and explain when it applies.
List the features of intermediate-term debt.
Identify why factoring may be an expensive source of funds.
Illustrate how pledging an asset may be used as a source of short-term financing.
Explain why trade credit is a source of credit for many firms while commercial paper is a source for larger, creditworthy companies.
Estimate the interest rate paid on a commercial bank loan, trade credit, and commercial paper.
Explain why trade credit is a spontaneous source of funds.
List common features of a commercial bank loan.
Distinguish among commercial bank loans, trade credit, and commercial paper as a source of funds.

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