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##### Comment on the size, structure and composition of the commercial banking industry.

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**Question**

Answer all questions.;1. Comment on the size, structure and composition of the commercial banking industry. Do;you think that the outlook for the industry is positive or negative? Why?;2. Evaluate the classes and subclasses of life insurance by comparing their benefits and;risks.;3. Assess the regulatory environment faced by brokerages and investment banking firms.;Do you consider this environment to be highly regulated, moderately regulated or;unregulated. Justify your response.;4. Compare and contrast credit risk with liquidity risk.;5. Describe the size, structure and composition of the mutual fund industry. Do you;consider these characteristics as having a positive or negative impact on investors?;Why?;6. An investment bank pays $ 23.00 for 4 million shares of JC Co., and then resells them;for $ 25 per share. How much money does JC receive? What is the profit to the;investment bank?;7. An investment bank pays $ 20.50 per share for 3 million shares of X. It then sells these;shares to the public for $ 22.50 per share. How much money does X receive? What is;the profit to the investment bank? What is the stock price of X?;8. A mutual fund owns 500 shares of X currently trading at $ 12, and 300 shares of Y;currently trading at $ 24. The fund has 900 shares outstanding.;a. What is the Net Asset Value of the fund?;b. If investors expect the price of X shares to increase to $ 14, and Y shares to;decrease to $ 23, at the end of the year, what is the new NAV?;c. Assume that the expected price of X shares is realized at $ 14. What is the maximum;price decrease that can occur to Y to realize an end of year NAV equal to the NAV;estimated in (a).;9. Assume that a bank has assets located in the EU worth 101 million euros, on which it;earns an average of 9% per year. The bank has 76 million Euros in liabilities on which;earns an average of 5% per year. The spot exchange rate is 0.76 euros/$.;a. If the exchange rate at the end of the year is 0.79euros/$, will the dollar have;appreciated or depreciated against the euro?;b. Given the change in the exchange rate, what is the effect in dollars on the net;interest income from foreign assets and liabilities?;10. Consider the following balance sheet for X Savings (in milllions).;Assets;Floating rate mortgages;$ 40;(Currently 9% annuall7);30-year fixed rate loans;(Currently 6% annuall7);Total Assets;40;80;Liabilities and Equity;1-year time deposits;(currently 5% annually);$ 50;3-year time deposits;(Currently 7% annually);Equity;Total liabilities and equity;20;10;80;a. What Is Xs expected net interest income at year end?;b. What will net interest income be if interest rates rise by 1 percent?;c. Using the cumulative repricing gap model, what is the expected net interest income;for a 1 percent increase in interest rates?;d. What will net interest income be at year end if interest rates on rate sensitive assets;increase by 1% but interest rates on rate sensitive liabilities increase by 0.5%?;View Full Attachment;Additional Requirements

Paper#27895 | Written in 18-Jul-2015

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