Explain the main risks which financial institutions face which could cause foremost profit and solvency issues?
If the bank were to utilize a variety of sophisticated tools to get rid of completely the risk in the particular asset, what would be resultant yield? What spread to Treasury?
Banks are exposed to variety of risks, currency, prepayment, including default, duration, and so on. To manage their risk exposure, must a bank look for to minimize each kind of risk?
2) On July 1, 2007, you buy a $1,000 par value 10-year Note with 9% coupon rate at the price of $600 for a yield to maturity (YTM) of 14%. On January 1, 2010, Note has the value of $975 and the YTM of 9.5% and was sold. Suppose original purchase reinvestment rate, determine the total holding period return on investment?