Chapter 3 Homework Solution
Answers to End-of-Chapter Questions
$2000 $100/(1 i) $100/(1 i)2 $100/(1 i)20 $1000/(1 i)20.
You would rather be holding long-term bonds because their price would increase more than the price
of the short-term bonds, givi
How do Risk and Term Structure Affect Interest Rates?
We will fist examine bonds that offer similar payment streams but differ in price. The price
differences are due to the risk structure of interest rates.
Next, we will look at the different r
Why Study Financial Markets and Institutions?
Financial markets- markets in which funds are transferred from people who have an excess
available funds to people who have a shortage.
Financial markets are crucial in our economy.
1. Channel funds
Chapter 17 Banking and the Management of Financial Institutions
Banks play an important role in channeling funds (about $6 trillion annually) to finance
productive investment opportunities.
They provide loans to businesses, finance college educations,
Chapter 11 Return and Risk (CAPM)
(11.1) Individual Securities
1 Expected Return-return that and individual expects a stock to earn over the next period.
2 Variance and Standard Deviation- asses the volatility of a securitys return. Variance is a
Notes for Test #1
5 Questions each chapter. 100points possible. Concepts mostly. About 40 questions
What is a Financial Markets?
A financial Market(s) in which funds are transferred from people who have a
surplus of available funds to people
Chapter 11 HW (5, 7, 9, 11)
The price of 182 day commercial paper is $7,840. If the
annualized investment rate is 4.093%, what will the paper
pay at maturty (FV)?
IMPORTANT NOTE REGARDING THIS CHAPTER
[ (FV-7840) / 7840 ] * (365/182) = 0.04093
[ (FV -7
Chapter 9 (6 questions)
Structure of the Federal Reserve System:
The 12 Federal Reserve Banks (FRB): Each of the 12 districts have a main Fed
Bank and at least one branch office. Quasi-public (part private, part government)
owned by member commercial ban
Return on Assets
Return on Equity
Long Term Debt / Equity
Total Debt / Equity
Number of Employees
CEO of the Company
Our group performed a ratio analysis on JP Morgan Chase, Wells Fargo and
SunTrust bank. The ratios we used to measure bank performance were return on
assets, return on equity, earning per share, price per ear
Measuring Interest rates
Present Value Concept
Different debt instruments have very different streams of cash payments to the holder
(known as cash flows), with very different timing.
All else being equal, debt instruments are evaluated agains