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(a) RBC has 100 loans outstanding, each for $1 million, which it expects to be repaid today. Each loan has a 5% probability of default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. BMO has only one loan of $100 million outstanding, which it also expects will be repaid today. It also has a 5% probability of not being repaid. Explain the difference between the types of risk each bank faces. Which bank faces less risk? Why?
(b) Explain why the risk premium of a stock does not depend on its diversifiable risk.
Enumerate about the Redemption Yield or Yield to Maturity (YTM) Redemption yield is indicated or promised rate of return an investor would receive from a bond purchased at t
Limitations of Ratio Ratios have weaknesses as following like: 1. They avoid the size of the firm being compared as in cross-sectional analysis; the firm being compared m
Reasons for why Ordinary Share Capital is Attractive Reasons for why ordinary share capital is attractive despite to be risky Shares are used as securities for loans as
The Balance Sheet of Bharat Machinery Ltd., as on December 31, 2009 and 2010 are as follows: Items Dec. 31, 2009 Rs. Dec. 31, 2010 Rs.
Solve the following Linear Programming Problem using Simple method. Maximize Z= 3x1 + 2X2 Subject to the constraints: X1+ X2 = 4 X1 - X2 = 2 X1, X2 = 0
Cost of Retaining Finance This will contains dividends for share capital and interest for debt finance or can say tax deducted or like effective cost of debt. Though, when co
what is the nature and function of money?
List and explain the three financial factors that influence the value of a business. Ans: The three issues that influence the value of a firm's stock price are cash flow , ti
Define the term contractual savings depository institutions. Contractual savings institutions: Contractual savings institutions obtain funds at periodic intervals onto a
what is bank draft?How it can be prepared?
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