Week 9 Homework
Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link.
- Select one factor that affects cash flows for a bank valuation. Why is this factor significant for banking operations?
- Select one factor that affects the required rate of return for investors in commercial banks. Why is this factor significant for investors?
- Differentiate interest income from non-interest income. Which, if any, is more significant for long-term health of banks (in your opinion)? Why?
- Refer to Exhibit 20.5 in Chapter 20. Briefly explain one-way bank managers may minimize the risk of loan losses given economic conditions.
- Problem 1 – assessing bank performance (chapter 20, page 576).
- Briefly explain why a bank’s capital – or net worth – is important when it comes to possible losses, such as during the 2008-09 financial crisis.
- Briefly explain one of the risks banks face. Why is this risk significant for banks?
- Select and briefly explain one way banks may manage interest rate risk. Why might it be impossible to eliminate the risk completely?
- Select one notable bank failure during the 2008-2009 credit crisis. What was the primary reason for this failure?
- Briefly explain how a credit union differs from a traditional commercial bank.