Net worth-assets and liabilities

Assignment Help Financial Management

Reference no: EM132012221

1. Assuming that the average duration of its assets is 7 years, while the average duration of its liabilities is 4 years, then a 2 percentage point increase in interest rates will cause the net worth of First National Bank to (increase, decrease) by ________ percent of the total original asset value. (Hint: Net worth=Assets-Liabilities)

2. Which of the following statements is CORRECT?

A. Risk refers to the chance that some unfavorable event will occur, and a probability distribution is completely described by a listing of the likelihood of unfavorable events.

B. Portfolio diversification reduces the variability of returns on an individual stock.

C. The smaller standard devaition is, the less likely that actual returns will be closer to expected returns, the lower the investment risk.

D. A stock with a beta of 1 is more risky than an average stock on the market.

E. A well-diversified investor will require to earn higher return on stocks with higher beta.

Reference no: EM132012221

Questions Cloud

Employees in managerial positions : Therefore, I propose a policy that requires at least the employees in managerial positions and above to be transferred to a different office every five years

Does the author justify the importance of the research : Does the author justify the importance of the research? In the case of a literature review, has the author examined the relevant literature?).

Probability that four out of six water heaters : Suppose a quality check was conducted on a sample of six water heaters. What is the probability that four out of six water heaters will be defective?

What were the main challenges faced by keda in each stage : Leadership plays a pivotal role in the success of ERP Projects. Which "leadership best practices" did the Keda managers engage in?

Net worth-assets and liabilities : Cause the net worth of First National Bank to (increase, decrease) by ________ percent of the total original asset value

Formulate problem as a linear programming problem : A dietician wishes to mix two types of foods, Formulate this problem as a linear programming problem to minimize the cost of such a mixture

Discuss how would execute change management in organization : Discuss how you would execute change management in your organization if you were implementing a new system

What visible signs of success would you look for : What barriers might you anticipate when implementing the intervention as planned? What visible signs of success would you look for?

How sensitive is ocf to changes in quantity sold : What is the value in year 9 of a $1,500 cash flow made in year 5 if interest rates are 8 percent? How sensitive is OCF to changes in quantity sold?

User Account

All Pages