The homework assignment includes the following four questions (Give me the answer and calculation)

The homework assignment

includes the following four questions

(Give me the an

swer

and

calculation

)

1.

C

hapter 12

–

p.

326

-

#10

(

On question #1 you will need to utilize Gap Analysis

in order to get the correct answer

.)

A bank with a two

-

year investment horizon

has issued a one

-

year certificate of

deposit for $50 million at an interest rate of 2 percent. With the proceeds, the

bank has purchased a two

-

year Treasury note that pays 4 percent interest.

What risk does the bank face in entering into these transactions

?

What would happen if all interest rates were to rise by 1

percent?

2.

Chapter 13

-

p. 358

-

#17

Suppose you have a defined

-

contribution pension plan. As you go through your

working life, in w

hat order would you choose to have the following portfolio

allocations:

(a) 100 percent bonds and money

-

market instruments,

(b) 100 percent stocks,

(c) 50 percent bonds and 50 percent stocks?

3.

Chapter 15

-

p. 421

-

#17

Suppose in an election year the economy started to

slow down. At the same

time, clear signs of inflationary pressures were apparent. How might the central

bank with a primary goal of price stability react? How might members of the

incumbent political party who are up for re

-

election react? (LO2)

4.

Chapter 17

-

p. 480

-

#19

In which of the following cases will the size of the central bank’s balance sheet

change? (LO2)

a. The Federal Reserve conducts an open market purchase of $100 million U.S.

Treasury securities.

b. A commercial b

ank borrows $100 million from the Federal Reserve.

c. The amount of cash in the vaults of commercial banks falls by $100 million

due to withdrawals by the public.

The homework assignment includes the following four questions (Give me the answer

and calculation)

1. Chapter 12 – p.326-#10 (On question #1 you will need to utilize Gap Analysis

in order to get the correct answer.)

A bank with a two-year investment horizon has issued a one-year certificate of

deposit for $50 million at an interest rate of 2 percent. With the proceeds, the

bank has purchased a two-year Treasury note that pays 4 percent interest.

What risk does the bank face in entering into these transactions?

What would happen if all interest rates were to rise by 1 percent?

2. Chapter 13 - p. 358 - #17

Suppose you have a defined-contribution pension plan. As you go through your

working life, in what order would you choose to have the following portfolio

allocations:

(a) 100 percent bonds and money-market instruments,

(b) 100 percent stocks,

(c) 50 percent bonds and 50 percent stocks?

3. Chapter 15 - p. 421 - #17

Suppose in an election year the economy started to slow down. At the same

time, clear signs of inflationary pressures were apparent. How might the central

bank with a primary goal of price stability react? How might members of the

incumbent political party who are up for re-election react? (LO2)

4. Chapter 17 - p. 480 - #19

In which of the following cases will the size of the central bank’s balance sheet

change? (LO2)

a. The Federal Reserve conducts an open market purchase of $100 million U.S.

Treasury securities.

b. A commercial bank borrows $100 million from the Federal Reserve.

c. The amount of cash in the vaults of commercial banks falls by $100 million

due to withdrawals by the public.