1.Within the context of bank capital, Debt capacity and flexibilitystates thata bank may wish to hold more...

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Question:

1.Within the context of bank capital, Debt capacity and flexibilitystates thata bank may wish to hold more equity capital so that they have the flexibility of being able to access spare debt capacity, this may be needed to fund unexpected liquidity needs or an unexpected profitable investment.

Select one:

True

False

2.Loans sales create a secondary market for bank loans.

Select one:

True

False

3.The profitability of securitised assets is largely determined by the special purpose vehicle's:

Size

timing insurance.

debt to equity ratio.

None of the listed options is correct

4.Costs of securitisation include:

costs of over-collateralisation.

All of the listed options are correct.

costs of public/private credit risk insurance and guarantees.

valuation and packaging costs (the cost of asset heterogeneity).

5.What is the monthly payment of a $15 million pool of 15-year mortgages with an 8.5 per cent monthly mortgage coupon p.a. (The mortgage-backed security guarantee fee is assumed to be 60 basis points and the bank servicing fee 40 basis points).Assume that the pass-through security is fully amortised.

None of the listed options is correct.

$83,333.33

$1000,000.00

$95,565.21

6.Consider $200 million of 30-year mortgages with a coupon of 10 per cent p.a. paid monthly.The monthly mortgage payment for this security is:

$1125000.00

None of thelisted options is correct

$ 272358.60

$5000,000.00

7.When current mortgage rates fall sufficiently low that the present value savings of refinancing outweigh the cost of prepayment penalties(and other fees and costs), the mortgage holders are said to have a valuable:

call option

Put option

futures contract.

forward agreement.

8.Monash Bank considering selling 3 years loan of $100 million8%interest with recourse to a buyer with an 8.5% discount. The buyer is negotiating with the bank to buy the loan without recourse with a 8.6% discount. If you know that the loan is expected to have zero default, the bank should sell the loan with:

Buy insurance for the loan defaulting and sell with recourse

With recourse

Without recourse

There is no enough information to decide.