Explain why a domestic bank in the U.S. might create a subsidiary bank in a foreign location like the Cayman Islands.
What will be an ideal response?
A U.S. domestic bank may find it profitable to create a subsidiary bank in the Cayman Islands. The Cayman Island subsidiary may be regulated to a lesser degree allowing for more profitable (albeit higher risk) operations. In addition, the Cayman Island subsidiary may not have to meet the reserve requirements of the Federal Reserve nor purchase FDIC insurance. Both of these can increase the profits for the Cayman subsidiary as well as the parent bank.
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Proprietary income refers to
A. revenue flowing to the government from taxes. B. revenue generated by government-run businesses. C. transfer payments from the government to the owners of property resources. D. money borrowed by the government to finance its operations.
Opportunity cost can be best defined as
A. all sunk costs. B. the value of the best alternative given up when making a choice. C. the explicit cost of an activity. D. the cost of making one additional unit.
A bank that does not want to hold a lot of excess reserves but wants to manage liquidity risk is likely to:
A. make sure that most of its assets are in small business loans. B. hold a lot in highly liquid securities. C. have a high ratio of loans to securities. D. limit withdrawals by customers.
Refer to the information. In equilibrium, the level of saving will be:
Answer the question on the basis of the following information for a private closed economy. where S is saving, I g is gross investment, i is the real interest rate, and Y is GDP.
A. $10.
B. $15.
C. $20.
D. $30.