Management of Financial Institutions

Identify the participants of financial markets

What are type I liabilities? Explain with an appropriate example.

Define technology and operation risk.

In what condition a brokerage firm will issue a margin call?

What would happen to stock price after right offering?

State any three properties of financial assets.

List out the features of exchange-traded funds.

What is the annualized yield on a Treasury bill with 90 days to maturity, a face value of Rs. 1,000,000 and selling for Rs. 980,000 on bank discount basis?

Consider a universe of two stocks A and B with prices of Rs. 16 and Rs. 30 respectively. Calculate the price weighted index. If stock A goes 4 for 1 split, what is the new divisor?

Suppose nominal rate is 10 percent and inflation rate is 4 percent, what is the real rate?

What are different types of insurance? Explain

What are the corporate senior securities? Explain the various types of corporate senior securities.

Suppose ABC commercial bank has assets of Rs. 20 million with a risk weight of zero, assets of Rs. 250 million with a 0.2 risk weight, assets of Rs. 870 million with a 0.5 risk weight and assets of Rs. 950 million with a risk weight of 1. Further suppose that this bank reports tire-one capital of Rs. 250 million and tire-two capital of Rs. 80 million.

a. What is the total risk weighted assets of this bank?

b. What is the tire-one capital ratio?

c. What is the tire-two capital ratio?

d. What is the total capital ratio?

e. Do you think that the bank has proper capital ratio as per demanded by NRB. Explain.

Suppose banks and depository institutions receive additional excess reserve in the amount of Rs. 200,000 and the central bank has fixed 5 percent reserve requirement on transaction deposits. Further, suppose all depository institutions continually make loans with this excess reserve.Suppose banks and depository institutions receive additional excess reserve in the amount of Rs. 200,000 and the central bank has fixed 5 percent reserve requirement on transaction deposits. Further, suppose all depository institutions continually make loans with this excess reserve.

a. Calculate the transaction deposit multiplier

b. Calculate the maximum amount of new deposits (loans) that all depository institutions can create?

c. If excess reserve declines from Rs. 200,000 to Rs. 150,000, what will happen to deposits?

Suppose that coupon rate for TIPS is 3.5 percent and inflation rate is 3 percent. Suppose further that an investor purchase on January 1, Rs. 100,000 of par value (principal) of this issue. As per the term and condition of the issue, inflation is adjusted semi-annually.

a. What will be the inflation adjusted principal at the end of the first six-month period?

b. What will be the coupon amount for the first six-month period?

c. What will be the inflation adjusted principal at the end of the second six-month period if inflation rate for the second six-month period is 1 percent?

d. What will be the coupon amount for the second six-month period?

Suppose that a mutual fund has the following assets and liabilities.

Number of outstanding shares : 10 million

a. What is the net asset value (NAV)?

b. If the value of stock held in portfolio rises by 10 percent and value of bond held in the portfolio falls by 2 percent, and cash and liabilities remain the same, what will be net asset value?

c. What will be the yield on your investment in the mutual fund if you purchase the mutual fund at NAV calculated in part 'a' and sell the unit at NAV calculated in part 'b'?

What are the categories of financial innovation? Explain different motivations for financial innovation?

You plan to purchase a Rs. 175,000 house load using a 15 years mortgage obtained from your local bank mortgage rate offered to you is 7.75%. you will make a down payment of 20 percent of purchased price.

a) Calculate your monthly payment on this mortgage.

b) Calculate the amount of interest and separately principal paid in the \( 180^{th} \) payment.

c) Calculate the amount of remaining mortgage balance at the end of \( 60^{th} \)months.

d) Construct an amortization schedule for the first five months.

e) Calculate the amount of interest paid over the life of this mortgage.

(a) The price of a 5 percent bond with principal of Rs. 1000 and a maturity of 15 years is Rs. 677.57. If that yield is increased by 50 basis points from 9 percent to 9.5 percent, the price would be Rs. 647.73. If the yield is decreased by 50 basis points from 9 percent to 8.5 percent, the price would be Rs. 709.35. Calculate percentage change in price.

(b) What is the cash flow of a 6 percent coupon bond that pays interest annually, matures in seven years, and has a principal of Rs. 1000. Assuming a discount rate of 8 percent, what is the price of this bond?

(c) Suppose you own a bond that pays Rs. 75 yearly in coupon interest and that is likely to be called in two years (because the firm has already announced that it will redeem that issue early). The call prices will be Rs. 1,050. What is the price of your bond now in the market if the appropriate discount rate for this asset is 9 percent?