Given the following information regarding Bank XYZ: DA = 3 years, DL = 5 years, A = $100 million, E = $10 million, we have a flat yield curve that is expected to fall from 8 to 7% in the next 6 months. Answer the following three questions related to this information: Which of the following statements is true?
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Given the following information regarding Bank XYZ: DA = 3 years, DL = 5 years, A = $100 million, E = $10 million, we have a flat yield curve that is expected to fall from 8 to 7% in the next 6 months.
Answer the following three questions related to this information:
Which of the following statements is true?
Select the correct answer:
1.- Assets increase from $100,000,000 to $104,629,630 (rounded)
2.- Assets decrease from $100,000,000 to $97,222,222 (rounded)
3.- Liabilities (“Liabilities”) increase from $90,000,000 to $94,166,667 (rounded)
4.- Liabilities (“Liabilities”) decreased from $90,000,000 to $85,833,333 (rounded)
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