A Report On Carson Company Essay
b. Rimsa decided to apply a fixed rate loan, because the initial spread of the loan would be increased. Sometimes, Rimsa would not expect that interest rates rise and may well benefit from conversion to a fixed rate loan. At the same way, Rimsa may hedge the risk of interest rates with derivative contracts. In general, it is frequent to see the savings institutions to be more capable than other nonfinancial businesses in covering their risk of interest rates.
c. If Rimsa should maintain the mortgage, I think its depositors therefore will provide the money. Whereas if it had to sell the mortgage to a pension fund because they will be willing to purchase this mortgage in the secondary markets, and their employees and employers will become investors who will expect to gain some return on the mortgage because it generates interest and principal payment for its participants
Problem Pg. 607 Flow of Funds Exercise
a. Fente’s net provides riskier loans, so it can charge a higher interest rate on its loans and that make its interest income to be higher…