Discuss the implications of a weakened real estate market

Assignment Help Finance Basics
Reference no: EM131414393

Publicly traded companies release financial statements (unaudited) on a quarterly basis. For the quarter ended December 31, 2009, MarketWatch reported that Bank of America (B of A) and Wells Fargo had improved their results over the same period in 2008 but that "lingering signs of credit trouble" still existed for the banks. B of A reported a smaller loss than in 2008, but past-due loans in home mortgages, home equity loans, and commercial real estate loans all grew, as did past-due loans in its business loan portfolio. At Wells, the company showed a quarterly profit versus the prior year's loss, but its net write-offs as a percentage of loans rose to 2.71 percent from 2.11 percent for the same period a year earlier. MarketWatch quoted an analyst who follows the banking industry as saying that he believes the problem loan situation is worse than what the banks have been disclosing.

REQUIRED:

Discuss the implications of a weakened real estate market on bank profitability. How would high unemployment, in addition to soft housing prices, affect banks' earnings? How does the provision for loan loss affect the balance sheet and the income statement of banks? Why do banks adjust the provision when market conditions change, and why do analysts sometimes question the amount of the reserve set aside by the banks?

Reference no: EM131414393

Questions Cloud

How you would present the information to senior managers : LDR/300- Your company's Vice President of Human Resources has approached your team. Explain how you would present this information to senior managers in your organization.
Discuss what economic factors influence loan defaults : Discuss the effect of "reserves for loan losses" on the financial statements and why a company such as New Century might be reluctant to increase the reserve. Discuss what economic factors influence loan defaults (and especially loans in the subpr..
What is quadrature amplitude modulation : The three different techniques described in this chapter are- What is quadrature amplitude modulation (QAM)? Why is data compression so useful? What is the purpose of multiplexing?
Identify current products that are on the market today : Products tend to go through certain stages during their life on the market. There are particular marketing characteristics associated with each stage of this cycle. Identify products that best represent each particular stage. Support your selectio..
Discuss the implications of a weakened real estate market : How does the provision for loan loss affect the balance sheet and the income statement of banks? Why do banks adjust the provision when market conditions change, and why do analysts sometimes question the amount of the reserve set aside by the ban..
How can nurses working in the community : How can nurses working in the community form partnerships with parish nurses and faith communities? How would such partnerships be beneficial
Research and discuss the basic theories of motivation : Please complete ONE of the following assignments, incorporating ideas and concepts from the week's lecture and/or articles. Please feel free to incorporate outside resources as well. When submitting your assignment, please indicate which of the th..
Develop the characteristics of various leadership theories : LDR/300-Develop the definition and characteristics of various leadership theories and approaches to leadership (trait leadership, behavioral leadership, contingency leadership, skills leadership and situational leadership).
Describe the type of health care organization : Describe the type of health care organization and the role(s) of the IT professional(s) that you interviewed. Explain what HMIS means to the individual(s) and provide a summary of the interview discussion

Reviews

Write a Review

Finance Basics Questions & Answers

  Capital market participants felt that credit default swaps

A survey by Fitch Ratings found that capital market participants felt that Credit Default Swaps, a form of derivative contract that pays off if the named underlier defaults on its debt obligations, are both more important as indicators of coun..

  Heavy rain cost of retained earnings

Heavy Rain Corporation just paid a dividend of $2.99 per share, and the firm is expected to experience constant growth of 4.71% over the foreseeable future. The common stock is currently selling for $90.21 per share. What is Heavy Rain's cost of r..

  What is the firm estimated intrinsic value

The company's WACC is 10.0%, it has $125.0 million of long-term debt plus preferred stock outstanding, and there are 15.0 million shares of common stock outstanding. What is the firm's estimated intrinsic value per share of common stock?

  Suppose interest rate differential in dollar and swiss

suppose interest rate differential in dollar and swiss francs is 4 percent per annum u.s. and swiss interest rates are

  What amount would be recorded in the paid-in capital account

If a firm issues 10,000 shares of common stock with a par value of $5 and for a sales price of $15, what amount would be recorded in the paid-in capital account?

  What is the relevant cost

What is the relevant cost of the 720 liters of the raw material when deciding how much to bid on the special order?

  Estimate the real rate with the approximation nominal

Given the information below, estimate the real rate with the approximation nominal interest rate equation and the true nominal interest rate equation (Fisher effect).

  The cost of debt capital is 10%.

VWX Corporation has an EBIT of $166,666.67, a corporate tax rate of 40%, debt of $500,000, and unlevered cost of capital of 20%. The cost of debt capital is 10%.

  Social responsibility-decision making

From the e-Activities, compare and contrast the social responsibility programs and initiatives of both Starbucks and Coca Cola.  Determine whether or not business ethics and social responsibility are important to you as a consumer, and provide one..

  International business-currency questions

Currencies fluctuate in value in terms of each other and some are hard and convertible while others are not. Please reference your local newspaper in the financial section

  Which of the following constraints have slack

If you could add one hour of capacity to any department to increase profit - adding one hour of capacity to which department would generate the biggest increase in profit: Forming, Hardening, or Deburring? Which of the following constraints have s..

  Which is the better investment based on risk aversion andwhy

Security A will yield a 6% return in one year. Security B will either yield a 3% return or a 9% return in one year with equal probability. Which is the better investment based on risk aversion and why?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd