Question $1-15$ Points

List and define the tools the Fed uses to influence the money supply and cost of credit.

Question $2-25$ Points

Distinguish between Monetary, fiscal policy and explain where each originated and explain how these policies individually and jointly impact the ability of borrowers to obtain loans?

Question $3-10$ Points

List both the benefits and disadvantages of increased competition.

Question $4-15$ Points

What is the Gap and Gap Ratio for an institution with $$70$ Million of rate$-$sensitive assets and $$55$ Million of rate$-$sensitive liabilities?

Question $5-10$ Points

Using Question $4$ scenario, Calculate the Gap to Earnings asset ratio.

Question $6-15$ Points

Find the risk$-$adjusted return on capital for a net interest margin of $2\mathrm{.}5\%,$ expected loss of $1\%,$ operating costs including taxes of $1\mathrm{.}75\%$ and economic capital requirement of $3\%$ that provides $99\%$ safety over and above the expected loss of $0\mathrm{.}5\%.$