Compensating balances
Explain the term: compensating balances and why do banks require compensating balances from some customers? When can a bank impose compensating balances?
Expert
Compensating balances are funds that a bank requires a customer to maintain in a non-interest bearing account until the loan is retired. Banks sometimes impose compensating balance requirements so as to increase the return of bank on a loan. Compensating balances are most likely to be used when the stated interest rate on a loan is below the bank’s required rate of return.
What is the meaning of statement: earnings available to common stock dividends paid from the current income and common stockholders statement affect the balance sheet item retained earnings.
How many forms are in Margin Hedging contained?
Explain Certainty equivalent as a function of the risk-aversion parameter.
You need to price an option that is paid for within instalments, and you can stop paying and lose the option. Which numerical method should you use?
Who introduced the concept of company’s debt associated to the strike price and the maturity of the debt?
What are Uses of Wiener Process/Brownian Motion in Finance? Answer: This is the most common stochastic building block for random walks within finance.<
Which ratios the bankers are most interested in while considering whether to grant a short-term business loan?
How is the option hedged?
Illustrates an example of GARCH.
Who measured risk as coherent, in finance theory?
18,76,764
1942931 Asked
3,689
Active Tutors
1457514
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!