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Look again at Problem. If RNB's assets have an average duration of five years and its liabilities have an average duration of three years, what is RNB's duration gap?
ProblemThe following entries (in millions of dollars) are from the balance sheet of Rivendell National Bank (RNB):
U.S. Treasury Bills $20 Demand deposits 40Mortgage-backed securities 30Loand from other banks 5C & J Loans 50Discount Loans 5NOW accounts 40Savings Accounts 10Reserve deposits with Federal Reserve 8Cash items in the process of collection 5Municipal bonds 5Bank building 4 a. Use the entries to construct a balance sheet similar to the one in Table 10.1 on page 281, with assets on the left side of the balance sheet and liabilities and bank capital on the right side.
b. RNB's capital is what percentage of its assets?
A firm has a debt-to-equity ratio of 1. Its cost of equity is 16 percent and its pretax cost of debt is 8 percent. If there are no taxes or other imperfections, what would be its cost of equity if the debt-to-equity ratio were zero?
Suppose that Apex Health Services has four different projects. These projects are listed below, along with the amount of capital invested and estimated corporate and market betas: How does the riskiness of Apex's stock compare with the riskiness of a..
Based on the corporate valuation model, the value of Serenity Inc. operations is $1,200 million. The company's balance sheet shows $80 million in accounts receivable, $60 million in inventory, and $100 million in market able securities. what is the b..
The Generic Publications Textbook Company sells all of its books for $100 per book, and it currently costs $50 in variable costs to produce each text. The fixed costs, which include depreciation and amortization for the firm, are currently $2 million..
Rashid purchased real estate known as Parcel A, subject to a preexisting mortgage, in favor of Local National Bank. Leila purchased real estate known as Parcel B, assuming a preexisting mortgage on it in favor of Local National Bank. Although Local N..
How are capital and working capital different? - How are capital and working capital different?- What is leverage, and how does it work? What is the main concern about using it?
As you will learn from your reading, there are basically only two sources of external funding available to a corporation: equity and debt. Choose one of the following topics and present your analysis, which may include your personal opinions:
A call option has an exercise price of $50. What is the value of the call option at expiration if the stock price is $35? $70? A put option has an exercise price of $30. What is the value of the put option at expiration if the stock price is $25? $40..
Dixon Manufacturing Company, which makes aluminum alloy wheels for automobiles, recently introduced a new luxury wheel that fits small sports cars. The company developed the following standards for its new product. Compute the standard cost per wheel..
You are considering the purchase of a share of Alfa Growth, Inc. common stock. You expect to sell it at the end of one year for $55.35 per share. You will also receive a dividend of $2.30 per share at the end of the next year. If your required return..
Discuss the basic assumptions of technical analysis. What is the difference between technical analysis and fundamental analysis? Describe one chart pattern and its potential significance is forecasting market direction.
The cost of the project is $1,200,000, which will be an immediate expense. The project is expected to produce cash flows in year 3 (end of Year) of $400,000 and this cash flow will grow at 15% for the following 5 years. At the end of the 6th year a c..
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