1. The expected loss rate for a customer is .50%, the 99% confidence interval VaR is 8 cents per dollar, the bank's cost of funding is 5.5%, and the cost of bank equity capital is 10%. Enter your answers to the following questions as decimals with four places of precision and precede the decimal with a zero (0.1234).
What is the cost of expected losses =
What is the cost of unexpected losses =
What is the loan rate to customers =
2. Duration can be used to measure interest rate shocks that are the consequence of changes in credit quality.
True
False
3. The net stable funds ratio (NSFR) is a shorter-term measure than the liquidity coverage ratio (LCR).
True
False