Rimsa Savings is a savings institution that provided Carson Company with a mortgage for its office building. Rimsa recently offered to refinance the mortgage if Carson Company will change to a fixed-rate loan from an adjustable-rate loan.
A. Explain the interaction between Carson Company and Rimsa Savings?
B. Why is Rimsa willing to allow Carson Company to transfer its interest rate risk to Rimsa? (Assume that there is an upward-sloping yield curve.)
C. If Rimsa maintains the mortgage on the office building purchased by Carson Company, who is the ultimate source of the money that was provided for the office building? If Rimsa sells the mortgage in the secondary market to a pension fund, who is the source that is essentially financing the office building? Why would a pension fund be willing to purchase this mortgage in the secondary market?
carson company has sometimes relied on debt financing from fente financing company fente has been willing to lend money even when most commercial banks were not fente obtains funding from issuing commercial paper and focuses mostly on channeling the funds to borrowers.
A. Explain how finance companies are unique by comparing Fente's net interest income, noninterest income, noninterest expense, and loan losses to those of commercial banks.
B Explain why Fente performs better than commercial banks in some periods.
C. Describe the flow of funds channeled through finance companies to firms such as Carson company. What is the original source of the money that is channeled to firms or households that borrow from finance companies?