English

1) Exchange Rate Systems. Explain the exchange rate system that existed during the 1950s and 1960s. How did the Smithsonian Agreement in 1971 revise it? How does today’s exchange rate system differ?

2) Impact of Economic Conditions. Assume that Switzerland has a very strong economy, putting upward pressure on both inflation and interest rate. Explain how these conditions could put pressure on the value of the Swiss franc, and determine whether the franc’s value will rise or fall.

3) Bank Balance Sheet. Create a balance sheet for a typical bank, showing its main liabilities (sources of funds) and assets (use of funds).

4) Bank Sources of Funds. What are four major sources of funds for banks? What alternatives does a bank have if it needs temporary funds? What is the most common reason that banks issue bonds?

5) Borrowing from the Federal Res3erve. Describe the process of “borrowing at the Federal Reserve.” What rate is charged, and sets it? Why do banks commonly borrow in the federal funds market rather than through the Federal Reserve?

6) Bank Capital. Explain the dilemma faced by banks when determining the optimal amount of capital to hold. A bank’s capital is less than 10 percent of its assets. How do you think this percentage would compare to that of manufacturing corporations? How would you explain this difference?

7) Credit Crisis. Explain how some mortgage operations by some commercial banks (along with other financial institutions) played a major role in instigating the credit crisis.