Questions from Financial Markets

Q: Banks offer a wide variety of business loans. Explain why banks

Banks offer a wide variety of business loans. Explain why banks try to seek a balance between short-term and long-term loans in their loan portfolio. What are the advantages and disadvantages of offer...

Q: Debbie has owned her home for several years and has been paying

Debbie has owned her home for several years and has been paying her mortgage on time every month. She is building equity in her home, which can then be used for what type of personal loan?

Q: Ben, who has health insurance provided through his employer, has

Ben, who has health insurance provided through his employer, has an appointment with his physician for an annual exam. Ben pays a $25 co-pay at the doctor’s office. Ben tells Sheila it cost him $25 fo...

Q: Commercial letters of credit and standby letters of credit tend to be

Commercial letters of credit and standby letters of credit tend to be very profitable for banks, yet they seldom require banks to lend money. Explain why.

Q: Many argue that when banks started to issue credit default swaps,

Many argue that when banks started to issue credit default swaps, they started to become insurance companies. Explain this argument.

Q: Lisa runs a commercial bank and wants to hedge her interest rate

Lisa runs a commercial bank and wants to hedge her interest rate risk. Which off balance sheet transaction is Lisa going to engage in on behalf of the bank?

Q: Bob and Karen are both applying for a consumer loan. They

Bob and Karen are both applying for a consumer loan. They both have the same current level of income and the same current level of debt. Why might Karen be more likely to get the loan if Karen is youn...

Q: Explain why not every asset can be used as collateral on a

Explain why not every asset can be used as collateral on a loan.

Q: Sunita is a loan officer at a bank. She is considering

Sunita is a loan officer at a bank. She is considering making a loan to a local business, but she is worried about the “conditions” variable of the five Cs of credit risk. What is Sunita worried about...

Q: Judy runs a bank and believes interest rates will increase in the

Judy runs a bank and believes interest rates will increase in the future. Explain what size interest rate gap the bank should have and why.