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15 Cards in this Set
- Front
- Back
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In duration analysis, the times at which cash flows are received are weighted by the relative
importance in present value terms of the cash flows arriving at each point in time. |
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To find the geometric average return for an investment, you find the total return for the investment (including any dividends or interest) for each year. Then you sum these returns and divide by the number of years.
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An investor holding a short position in an asset benefits from a falling asset price.
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Compared to an auditing firm, the OCC will spend relatively more time examining a commercial bank’s financial statements.
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Chartering of U.S. life insurance companies is typically done by the federal government.
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If the average maturity of an FI’s assets is 4 years and the average maturity of its liabilities is 4 years, then the FI has no interest rate risk exposure.
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F
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Compared to a similar two-year bond, the price of a three-year bond will change more when the yield on the bond changes by 1%.
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For a given change in interest rates, fixed-rate assets with shorter-term maturities will have greater changes in price than assets with longer maturities.
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U.S. GDP, within 10%, is currently $1.0 trillion per year.
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$13.2t, as of 2Q 2006 |
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The Fed’s three main policy tools are: i) performing open market operations, ii) offering discount loans, iii) changing the reserve requirement.
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If the Fed undertakes an open market sale of securities, it will end up shifting the demand curve for federal funds to the right, thus driving up the fed funds rate.
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Off-balance-sheet activities often affect the shape of an FIs future balance sheet through the creation of contingent claims.
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The economic definition of the value of an FI's equity is the book value of assets minus the market value of liabilities.
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Two people (Anne and Bob) have the same annual taxable income of $40,000. Anne’s $40k includes wages and capital gains while Bob’s just has wages. All else equal, you should expect Bob to pay more U.S. income tax.
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A commercial bank can nearly eliminate firm-specific credit risk by having an extremely diversified loan portfolio.
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