Final FIN 353 47. A bank needs 0.7 6 million to meet reserve requirements? What

Question

Final FIN 353 47. A bank needs 0.7 6 million to meet reserve requirements? What is the third most desirable way to raise reserves to meet the requirement? (This question is not asking for the most desirable way but the third most desirable way.) A. Borrow 0.76 million from the Fed. B. Sell 1 million dollars in loans at 76 cents to the dollar. C. Sell 0.76 million of T-bills. D. Borrow 0.76 million from another bank at the federal funds rate. 48. Which statement is most valid? A. For venture capital investment in the early stages of analysis, emphasis is placed on the discounted cash flow approach to valuation. B. For buyout investments, relative value approaches are used for valuation. C. If a comparable group exists, multiples of revenues or earnings are used to derive a value for venture capital. 49. If a bank has $102,316 of deposits, a required reserve ratio of 12.00%, and S33.529 in reserves, then the maximum deposit outflow it can sustain without altering its balance sheet is? A. $24,149 B. $25,275 C. $21,251 D. $8,254 50. What type of hedge fund buys stocks they think will increase in price and shorts stocks they think will decrease in price where the overall portfolio exposure to stocks is zero? A. Long-Short B. Bond Arbitrage C. Market Neutral D. Business cycle boom

Explanation / Answer

47) If a bank needs 0.76million to meet the reserve requirements then the following options have been provided, we will discuss one after the other;

Selling of T-Bills of 0.76 million is the first options as these are short term money market instruments which the banks can sell as they invest into it

Borrowing funds from other banks at fed rate is the second best option as that involves paying of interest but will not involve in selling of any long term assets from the banks view point

Selling of Loans is selling of assets for banks so that is the 3rd best possible options for banks if they do not accumulate funds which they require

Fed is considered to be the last resort for banks to borrow money to meet their reserve requirements.

Since the 3rd best option has been asked, so it’s will be selling of 1million dollars in loans at 76 cents to the dollar so option (B) is correct.

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.