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A bank originates $150,000,000 worth of 30-year single-family mortgages funded by demand deposits and the required amount of capital. Reserve requirements are 10 percent and the bank pays 32 basis points in deposit insurance premiums. The bank is earning a 6.25 percent coupon on the mortgages. The mortgages are priced at par and total monthly payments on the mortgages are $923,576. If the mortgages are securitized and deposits are reduced, how much will the bank save in the first year's reserve requirements and deposit insurance premiums in total? Assume the minimum risk-based capital requirement is 8 percent and that mortgages carry a 50 percent risk weight a)$144,460,800 b)$160,512,000 c)$165,476,200 d)$178,332,500 e)$181,249,300
Given the increasing longevity of Americans and the costs of providing long-term care, anticipation of the costs should be a major element of every family’s financial planning. Current information suggests however, that very few families or individua..
Project A has an NPV of $20,000 and a PI of 1.2. Project B has an NPV of $10,000 and a PI of 1.3. Both projects have equal lives. Which project should be preferred if we are NOT concerned with capital rationing (that is, we are NOT concerned with bei..
Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $36, $312, and $82, respectively. If Baker undergoes a 3-for-2 stock split, what is the new divisor for the price-weighted index?
A bond has a par value of $1,000, a time to maturity of 20 years, and a coupon rate of 7.20% with interest paid annually. If the current market price is $720, what will be the approximate capital gain of this bond over the next year if its yield to m..
You are called in as a financial analyst to appraise the bonds of Olsen's Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 10 percent, which is paid semiannually. The yield to maturity on the bonds is 10 percent annua..
In an efficient market, the price of a security will:
You just won the lottery, which promises you $260,000.00 per year for the next 20 years, starting today. That is, this is an annuity due. If your discount rate is 7.00%, what is the "present value" of your winnings?
Prepare the journal entry to reflect the initial $86,000 investment and evaluate the three proposals for expansion, providing the pros and cons of each option.
Great Wall Pizzeria issued 12-year bonds one year ago at a coupon rate of 6.9 percent. If the YTM on these bonds is 9.1 percent, what is the current bond price?
A project has the following estimated data: price = $77 per unit; variable costs = $41.58 per unit; fixed costs = $7,600; required return = 12 percent; initial investment = $8,000; life = seven years. Ignoring the effect of taxes, the accounting brea..
What is the net present value of a project that has an initial cash outflow of $12,670 and the following cash inflows? The required return is 11.5%
The management of Brinkley Corporation is interested in using simulation to estimate the profit per unit for a new product. The selling price for the product will be $45 per unit. Compute profit per unit for the base-case, worst-case, and best-case s..
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