If FNBNA Is Expecting a $10 Million Net Deposit Drain

question 46

Multiple Choice

If FNBNA is expecting a $10 million net deposit drain and the securities liquidity index is 0.97, by how much will pre-tax net income change if the drain is funded entirely through securities sales?

• A) -$306,122
• B) -$150,000
• C) -$375,339
• D) -$476,289
• E) -$474,490 Liquidate securities totaling 10M/0.97 = 10,309,278, losing interest income = 5.5% x 10,309,278 = 567,010, losing $309,278 on the fire sale, and gain in interest expense of 4% x 10 million core deposits = 400,000, for net total loss of $476,289.

Understand the definition and importance of supply chain management in a global context.

Identify and describe different transportation modes and their applications.

Recognize and explain the concept of sustainable supply chain practices.

Explain the role of distribution centers in supply chains.

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Definitions:

Risk Characteristics

The identifiable attributes of a security, financial instrument, or investment that determine its risk profile, such as volatility, liquidity, and credit risk.

Divisions

Separate parts or branches of a company that operates under the greater corporate umbrella, each might focus on a specific product line or market segment.

Empirical Approach

A method of acquiring knowledge based on observation or experience rather than theory or pure logic.

After-Tax Cost of Capital

The net cost of capital to a firm after accounting for the tax benefits received on debt interest, reflecting the true cost of acquiring funding after taxes.