Question: A customer ask a bank if it would be willing to commt to making the cusomer a one year loan at an interest rate of

A customer ask a bank if it would be willing to commt to making the cusomer a one year loan at an interest rate of 9% one year from now. to compensate for the costs of making the loan, the bank needs to charge one pecentage point more than the expected interest rate on a canada bond with the same maturity if it is to make a profit. If the bank manager estimates the liquidity premium to be 0.4% on a two year canada bond, and the one year canada bond rate is 6.5% and the two year bond rate is 7.5%, should be the manager be willing to make the commitent?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

To determine if the bank manager should be willing to make the commitment lets break down the inform... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

CPP 6-1 (#2) Complete 4th Quarter and Year-End Payroll Reporting Complete Form 941 for the 4th quarter for TCLH Industries (which is located at 202 Whitmore Avenue, Durham, NC 27701; Employer...

Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...

1 What are the main components of personal financial planning? Solve What is the purpose of a financial plan? Solve Identify some common actions taken to achieve financial goals. How does a job...

7) The second financial statement to prepare is the statement of retained eamings. To determine the ending balance of retained earnings you need to start with the opening balance as reported in the...

A customer asks a bank if it would be willing to commit to making the customer a one-year loan at an interest rate of 6.5% two years from now. To compensate for the costs of making the loan, the bank...

a ) A customer asks a bank if it would be willing to commit to making the customer a one - year loan at an interest rate of 8 % one year from now. To compensate for the costs of making the loan, the...

A customer asks a bank if it would be willing to commit to making the customer a one-year loan at an interest rate of 6.5 % two years from now. Since the customer has high-level creditworthiness, the...

Can someone please assist me (I did my work) to make a better version overall? The image down below has instructions: # Recognizing accounts receivable is relatively straightforward. = Aservice...

Please Complete Assignment 1-6. Accounting Cycle Project (Group) ACCT3303 Spring 2020 Assignments Required: 1) Making journal entries for each transaction in chronological order. 2) Posting to the...

I would love some help with this analytical measure!! (Instructions) Perform analytical measures for Columbia Sportswear for the most current year. Complete the Liquidity, Solvency and Profitability...

Tim and Anna are a couple who have been married for 20 years. In 2010, they spent about $300,000 to buy a three-bedroom house near the beach as their own home, but in early 2021, they bought a new...

Your supervisor, Heather, has a number of clients in the fruit and farming industry. The clients are Raspberry Limited, Sour Grapes Pty Ltd, Bouncing Berries Pty Ltd and Lemon Zest Limited. Raspberry...

evaluate ( 4 9 - ( - 2 3 ) 2 ) * 1 0

As chief human resources officer in Apple Company and you to report to apples CEO, what are the pros and cons to do business or expand in china & India. -what is the best country between china...

Write a report in which an objective analysis wherein the degree of course goal achievement is reported. The only sources allowed are your own work completed in the WRC 1023 course. The mini...

The project requires to obtain annual reports for any company in given industry. Then, students are required to analyze key trends in the companys income statement and balance sheet accounts, to...

Two strings are k-bonded if they share at least k common characters. Each character can contribute at most one bond. For instance, aabbccddXYZABeeffGg and Gfeeexyzab are 1-, 2-, 3-, 4-, 5- and...

The cellar door is held in place by the hinges at A and B and the tension (F) in the rope at C. Find the magnitute (absolute value) of the moment about line AB due to the force F. Use a determinate...

What is the relationship between the SOW and a Request for Proposal ( RFP ) ?

An interest only mortgage is made for $80,000 at 10 percent interest for 10 years. The lender and borrower agree that monthly payments will be constant and will require no loan amortization. a. What...

MakeNu Mortgage Company is offering a new mortgage instrument called the Stable Mortgage. This mortgage is composed of both a fixed rate and an adjustable rate component. Mrs. Maria Perez is...

What are some important lease provisions of which investors should be aware when analyzing the financial statements of REITs?

Explain the tax similarities and differences between qualified defined contribution plans and nonqualified deferred compensation plans from an employee's perspective.

Sylvana is given a job offer with two alternative compensation packages to choose from. The first package offers her $250,000 annual salary with no qualified fringe benefits. The second package...

From a nontax perspective, what issues does an employee need to consider in deciding whether to defer compensation under a nonqualified deferred compensation plan or to receive it immediately?