HELP PLS TO SOLVE OUT THOSE PROBLEMS. 1-Calculate the amount of excess reserve o

Question

HELP PLS TO SOLVE OUT THOSE PROBLEMS.

1-Calculate the amount of excess reserve of a bank with 15,000,000 of reserve and 100.000,000 of deposits if the reserve requirement is 10%

2. Suppose the yield on a 30-year corporate bond rated Aaa is 9.50 percent and the yield on a 30-year Treasury bond is 9.00 percent. What is the default risk premium? Would you expect a higher or lower default risk premium on an A-rated bond?


3. Calculate the gross profit that an underwriter would make if it sold $20 million worth of bonds at par (face value) and paid the firm that sold the bonds 98.75% of par

Explanation / Answer

15MM-.1 *100MM= 5MM. 9.50-9= 0.50. Higher for a A rated since it carries a lower rating. 20MM* .0125= $250,000

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