1.Find a recent (January 2012-March 2012) money and banking related article in the media (the Economist, Globe and Mail, National Post, New York Times, etc.,), and attempt to explain parts or all of it using the tools we learned in class. Highlight the sentences that you analyze, and hand in the article along with your work. Use written and graphical explanations.
2. What role did weak financial regulation and supervision play in causing the 2007-2009 financial crisis?
3. Below are First Bank's Assets and Liabilities:
Also assume that the average duration of its assets is 2 years, that interest rates are initially at 10%, and that the bank's equity capital is $10 million.
(a) If the First Bank sells $10 million of its fixed rate assets and replaces them with rate-sensitive assets, what is the income gap for the bank? What will happen to profits next year if interest rates fall by 3 percentage points?
(b) If the First bank decides to convert $5million of its fixed rate assets into rate sensitive assets, what will happen to its interest rate risk? Explain using gap analysis.
(c) What happens to the market value of the banks assets if the interest rate increases by 2 percentage points?
4. Describe the transaction the Bank of Canada makes when wanting to raise the overnight interest rate.
Also outline the effects on economic activity (the way monetary policy works) when the interest rate rises.
5. For a country like Canada, a fixed exchange rate system is superior over a flexible exchange rate system. Furthermore, we should adopt a new, common currency with the U.S. and Mexico." Comment on this statement.