Fifth Bank Has the Following Balance Sheet with Values Stated

question 45

Multiple Choice

Fifth Bank has the following balance sheet with values stated in millions of dollars.All assets are associated with corporate customers (not governments or sovereigns) .Refer to Table 20-8 for associated risk weights. $\begin{array}{ll}\text { Cash } & \$ 80& \text { Deposits } &\$550\\\text { Municipal General Obligation } & \$ 100 \\\text { Bonds } & \\\text { Residential Mortgages 1-4 } & \$ 220& \text { Long-Term Debt }&\$290 \\\text { family (LTV 60\%-80\%) } & \\\text { Conmercial loans } & \$ 500&\text { Equity } & \$60 \\\text { Total Assets } & \$ 900&&\$ 900\end{array}$ In addition,Fifth Bank has off-balance sheet items as follows: (Refer to Tables 20-10 and 20-11)
$50 million in commercial letters of credit (LCs) ,
$300 million in 3-year interest rate swaps that are in-the-money by $2 million
$50 million in 4-year forward FX contracts that are out-of-the money by $2 million
What are,respectively,the credit equivalent value of the letters of credit,interest rate swaps,and FX contracts?

• A)$10.0 million;$3.5 million;$5.0 million.
• B)$50.0 million;$300 million;$50.0 million.
• C)$5.0 million;$1.5 million;$5.0 million.
• D)$10.0 million;$1.5 million;$5.0 million.

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Definitions:

Same Elasticity

A condition where two or more products have identical responsiveness in quantity demanded or supplied when there is a change in price.

Perfectly Elastic Demand

Refers to a market situation where consumers are willing to purchase any quantity of the product at a certain price, but no quantity at any other price.

Very Elastic Demand

A situation where the quantity demanded of a product changes significantly due to changes in its price.

Perfectly Inelastic Demand

A situation where the demand for a product remains constant regardless of changes in its price.