Moral hazard can contribute to high bank leverage in all of the following ways EXCEPT
A) having high capital requirements.
B) bank managers are compensated in part on providing shareholders with high returns on equity.
C) high bank leverage provides shareholders with a potential for a higher return on equity.
D) federal deposit insurance has reduced the incentive of depositors to monitor the behavior of bank managers.
A
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There can be an opportunity for covered interest arbitrage if:
a. the interest rate is low and the exchange rate is high. b. the forward/spot rate difference is either larger or smaller in percentage terms than the difference in the interest rates on two currencies. c. there is a time lag on the settlement of the transactions. d. the interest rate is high and the exchange rate is low.
Which of the following is NOT a nontransaction deposit?
A) a money market deposit account B) a certificate of deposit C) a savings account D) a NOW account