MONEY BANKNG FINANCE

Econ 301 Money and Banking RP2

Banking Management 1. You have just landed an internship with a large multinational bank in the US. You have been tasked to

analyze the statement of financial condition for the bank. New policy has dictated a 16% reserve ratio, if

the bank fails to meet the requirement you will be fined 1% of deposits for each day of shortfall

Using the data provided in excel template calculate

a. What is your bank capital value?

b. Have you met your minimum required reserve?

c. if you failed to meet min required reserve what is the amount in dollars

If your bank suffers a deposit outflow of $10 million with a required reserve ratio on deposits of 16%.. a. Correct and complete your Bank balance sheet b. Can you still manage to meet required reserve? c. How much is required to meet, what is the size of your shortfall?

Which option will you choose to correct the shortfall?

See excel and questionnaire multiple choice.

2. Your Associate also wants you to look at your competitors balance sheets to compare your financial condition. Using the Financial Statement links provided for Bank of America (BofA), Goldman Sachs (GS) and Citigroup

a. Import the missing data on Loans, Debt Securities and Deposits b. Calculate the loans/deposit ratio c. Calculate the Debt securities/ deposit ratio

3. Using your analysis answer the questions on the excel and questionnaire.

Bonds and Yields 1. You are tasked with investing your Bank's excessive reserves

a. You can use funds to invest in a 3 year US Treasury note. The coupon you receive on the US T note

is $300 per year for three years and a final payment of $1,000.

b. You can use funds to invest into a new startup, buy the startup firm's bond. You will receive

$1400 on this investment in the third year and nothing in the first two years.

If your interest rate (yield) is 1.95%, what should you pay for each of these investments?

Hint: Find the PV of these investments

c. Which of these investments is a zero coupon bond?

d. If you were a Bank regulator which of these investments would you weight to have

more risk?

Econ 301 Money and Banking RP2

Compare the following bonds

a. 20 year bond selling for $950 with annual coupon of 3% and face value $1,000

b. 1 year bond selling for $950 with annual coupon of 1% and face value $1,000

 Find the coupon value in dollars

 Solve for the YTM and Current yields

 Using your analysis answer the questions on the excel and questionnaire.

Term Structure of Interest Rates: Yield Curves 1. Import the Treasury Rates for all maturities and for dates given in the excel template 2. Create 2 plots

a. For 2006-2011 Yield Curves b. For 2012-2017 Yield Curves

3. Using your analysis answer the questions on the excel and questionnaire.

Extra Watch the links about Tulipmania and the South Sea Bubble and answer the questions in the

accompanying questionnaire.