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Answers for Tutorial Questions due Week 10

Answers for Tutorial Questions due Week 10 - Answers for...

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Answers for Tutorial Questions due Week 10 12.3 What are borrowed funds? Give some specific examples. Have borrowed funds become more or less important as a source of funds for banks? Borrowed funds are non-deposit borrowings which support lending or investing. Examples include short term borrowings in the form of BAB’s and commercial paper and repurchase agreements, and long term borrowings such as Eurobonds, debentures, unsecured notes and hybrid securities that can be converted into capital. Borrowed funds have become more important as other financial institutions have competed successfully to attract the short-term transactional and savings balances of the depositing public. 12.6 What are the major uses of funds for a bank? What are the differences between large and small banks? Explain the difference . A bank’s major uses of funds are lending and investing which make up a large portion of assets. Investment securities are more important to the portfolios of smaller banks than to those of larger banks. - Larger banks have access to many more sources of liquid funds than do smaller banks, and therefore they do not need to rely as heavily on investment securities for liquidity. (e.g.
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