money and banking

solve the attached questions

FINA3313-Money and Banking
Spring Semester 2018

Instructor: Riham K. Hassan

Grade

Student Name

Student ID

Section

Deadline: March 12, 2018 – in class

Instructions:

 Students must use and fill this form for all their assignments.

 Answers must be written on the enclosed blank pages only. DO NOT ATTACH ANY ADDITIONAL PAGES.

 Answers must be hand written and pages must be stapled.

 The Assignment must be submitted on the due date (mentioned above) and during the class, or by e-mail (if

the student was absent).

 Points will be deducted from the student’s assignment grades for ignoring the above-mentioned Instructions.



pg. 1

1. Rank the following bank assets from most to least liquid:

a. Commercial loans

b. Securities

c. Reserves

d. Physical capital

2. NewBank started its first day of operations with $155 million in capital. A total of $92
million in checkable deposits is received. The bank makes a $28 million commercial

loan and lends another $23 million in mortgage loans. If required reserves are 5.4%,

what does the bank balance sheet look like?

3. The bank you own has the following balance sheet:

Assets Liabilities

Reserves $75 million Deposits $500 million

Loans $525 million Bank capital $100 million

If the bank suffers a deposit outflow of $50 million with a required reserve ratio on

deposits of 10%, what actions should you take?

4. Suppose you are the manager of a bank that has $15 million of fixed-rate assets, $30
million of rate-sensitive assets, $25 million of fixed-rate liabilities, and $20 million of

rate-sensitive liabilities. Conduct a gap analysis for the bank, and show what will

happen to bank profits if interest rates rise by 5 percentage points. What actions

could you take to reduce the bank’s interest-rate risk?

pg. 2

pg. 3

pg. 4