Finance Final Exam-Essay Question

Please be aware of the words limit foreach question.

FINAL EXAM-FINANCE

Question1:

Reviewing the syllabus and excluding the chapters about the FED, what was the most interesting chapter and why? (5 points).

Question2:

Why is it important for all of us students of finance to have a clear understanding of what the FED does? (5 points)

Question3:

The table below

 

shows the balance sheet of all commercial banks based on aggregate data found in the Federal Reserve Bulletin. Compare the data in the table to the balance sheet of Bank of America (

BOA

) which can be found at 

https://www.marketwatch.com/investing/stock/bac/financials/balance-sheet

.  Specifically, add two columns to the table to present BOA percentages (

10

points).

 

All banks

BOA

			All banks		BOA
Assets	Liabilities
Reserves & Cash items	16	……..	Checkable deposits	10	…….

As far as BOA is concerned, use 2019 data. Use your table to compare the percentages of loans and securities in the balance sheet of BOA (2019) with the percentages of loans and securities presented in the balance sheet of all commercial banks (2016).  Limit your comparison to 200 words per category compared (loans (5 points) and securities (5 points)).   Remember to add the number of words and references.

The balance sheet of all commercial banks in 2016 in the table below (items as a percentage of total)

 

State and local government and other securities

 

 

10

 

 

 

 

8

 

 

Total

100

ASSETS	LIABILITIES
Reserves & Cash Items	16	Checkable deposits		10
Securities											Non-transaction deposits
U.S. government and agency	14	Small-denomination time deposits	50
	State and local government and other securities	6
Loans	Large-denomination time deposits
Commercial and industrial	13	Borrowings	19
Real estate	25	Bank capital	11
Consumer		8
Other	9
Other assets (for example, physical capital)
	Total		100

***** Source: http://www.federalreserve.gov/releases/h8/ and http://www.federalreserve.gov/releases/h6/.

Question4:

Bank of America Balance sheet also show: (5 points)

1. Customer liability on acceptances

2. Capitalized lease obligations

3. ESOP Debt guarantee

4. Other appropriate reserves

5. Accumulated minority interests

Briefly define each term do not exceed 100 words per term defined) (1 point per term defined total 5 points).  Remember to add the number of words and the references.

Question 5:

Find a recent event/article/commentary published in the popular press about:

1.      Securities Brokers and/or Dealers and/or Investment Banks

2.      How financial institutions manage credit risk?

3.      How financial institutions manage interest rate risk? 

The event/article/commentary must be recent (must have occurred after December 2019).   Summarize the event/article/commentary and explain why you have selected that event/article/commentary (maximum 200 words).  Email the link for the event/article/commentary.   Add the number of words and the references. (5 points per article, 15 points total)

Textbook

Financial Markets and Institutions”, 9th Edition by Frederic S. Mishkin, Stanley Eakins (ISBN 10: 0-13-451926-4-ISBN 13: 978-0-13-451926-5) – 2019

Module 1: Why Study Financial Market and Institutions

Module 2: Overview of the Financial System

Module 3: What do Interest Rates mean and What is their role in Valuation?

Module 4: Why Do Interest Rates Change?

Module 5: How do risk and term structure affect Interest Rates?

Module 6: The Money Market

Module 7: The Bond Market

Module 8: The Stock Market

Module 9: Central Banks and the Federal Reserve System

Module 10: Conduct of Monetary Policy