ALM
ALM 2
Financial Accounting
Ratios
Poverty Simulation
100
To rectify shortcomings with this, and due to the relative increases in computing horsepower, many institutions go to loading EVERY obligation into the ALM system. Instead of estimating value change from N obligation's durations, these institutions actually calculate the varying PV of ALL obligations individually
What is Duration
100
Using this securities strategy within a security class, invest 40% in short term, 20% in medium term and 40% in long term. For 5y UST portfolio, maintain 40% in 1y to go maturities, 20% in 2-4y to go maturities, and 40% in the newly issued 5y. This trades complexity of managing the security and transactional costs for a higher yield of longer -term holdings, while still maintaining a large degree of liquidity.
What is the Barbell Approach
100
1) Assets 2) Liabilities 3) Capital 4) Revenue 5) Expenses
What are the building blocks of accounting that appear on the Balance Sheet?
100
This ratio measures profitability and how it was attained.
What is Spread Analysis?
100
This percentage of American households in the US have less than three months' worth of savings.
What is 40%
200
PV (Assets at new interest rate) - PV (liabilities at new interest rate) =
What is Change in NW?
200
Using this security strategy if you believe rates will rise, shift to short term securities so that 1) they mature quickly and are reinvested in the expected higher rate 2) you avoid the loss of value from a long term coupon bond that loses value as the rates rise.
What is Playing the Yield Curve approach?
200
1) Revenue 2) Expenses 3) Cost of Funds 4) Net Income or Loss
Which building blocks of accounting are reported on the Income Statement?
200
This ratio measures how efficiently deposits are turned into loans?
What is the Loan to Share ratio?
200
With almost half of Americans living paycheck to paycheck with less than $6000 in savings for a family of four these households lack the financial resources to help them through income disruptions or financial emergencies. This is often called ______________
What is Liquid Asset Poverty
300
In this securities strategy is an investment program that is formulaic, without deviation or prediction of interest rates.
What is Passive?
300
If you are using the Playing the Yield Curve approach to securities and you believe that rates are going to fall you would
What is shift to long term securities so that higher coupons are garnered (over short term, given an upward sloping yield curve) and gains result as bond prices increase as rates fall.
300
1) Capital to Assets Ratio 2) Loan to Share (or Assets) Ratio 3) Spread Analysis with ROA Ratio 4) Delinquency and Net Charge off's ratio
What ratios are considered the "Universal Ratios"?
300
This ratio identifies how many cents it costs to earn $1 in revenue.
What is the Efficiency Ratio?
300
Households that often have modest incomes but can be found across all income levels.
What are low wealth households?
400
This securities strategy usually requires a prediction of the future path of interest rates or a perceived imperfection in the relative price of assets in the market. Generally these strategies can be classed as speculations.
What is Aggressive strategies?
400
When using this securities strategy you sell low coupon security, and buy high coupon security.
What is the Coupon Swap approach?
400
The purpose of this provides a 1) cushion (rainy day fund/hibernation fat) 2) allows the CU to take calculated risks 3) allows the CU to sustain growth in assets 4) ensures general public of safety and soundness of the institution
What is Capital?
400
This is a ratio of key balances on the Income Statement compared to the credit union's average total assets. This allows a comparison between periods and between financial institutions based on their asset size. This ratio measures profitability and how it was attained.
What is Spread Analysis or Net Interest Margin Analysis
400
1) lack of money management skillls 2) low-wages 3) lack of education 4) job loss 5) catastrophic illness
What are some of the reasons mentioned that low wealth households fail to accumulate assets and thereby financial security?
500
In this security strategy within a security class, when $X mature, reinvest $X at longest maturity?
What is Ladder (or Spread-Maturity) Approach?
500
Using this securities strategy involves using the 1 year low coupon vs the 10 year high coupon plus the possible gain on sale if the rates go down or stay the same. Should rates go up you may generate a loss.
What is the Riding the Yield Curve approach?
500
The most important sources of revenue
What are Loan Interest Income and Fees and other Non interest income?
500
This ratio tells you what portion of your assets belong to the member owners and what part is dedicated to creditors.
What is the Capital to Assets ratio?
500
The poverty income level for a family of four
What is $23,850 per year. As many as 43 million Americans are living in poverty. That is one in every seven people.
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