The Main Risks Facing Banks and Other Financial Institutions Analysis
Question Description
I’m working on a finance multi-part question and need an explanation and answer to help me learn.
1. To what different kinds of risk are banks and their financial-service competitors subjected today?
2. What forces cause interest rates to change? What kinds of risk do financial firms face when interest rates change
3. What is the yield curve, and why is it important to know about its shape or slope?
4. A bank reports that the total amount of its net loans and leases outstanding is $936 million, its assets total $1,324 million, its equity capital amounts to $110 million, and it holds $1,150 million in deposits, all expressed in book value. The estimated market values of the bank’s total assets and equity capital are $1,443 million and $130 million, respectively. The bank’s stock is currently valued at $60 per share with annual per-share earnings of $2.50. Uninsured deposits amount to $243 million and money-market borrowings total $132 million, while nonperforming loans currently amount to $43 million and the bank just charged off $21 million in loans.
Calculate risk measures as you can from the foregoing data.
Liquidity Risk, Interest Rate Risk, Capital Risk, Credit Risk, Price Risk
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