vu cs001 Mid Term Subjective Solved Past Paper No.3
vu cs001 Computer Proficiency License Solved Past Papers
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- They provide the channel for transfer of funds between saver and borrowers
- provide risk sharing like insurance
- provide payments like bank accounts
- Help those people which do not have enough capital to use profitable opportunity.
One way of managing liquidity risk is to keep excess reserves but this is not profitable as reserve is interest free. There are two other ways through which a bank can manage liquidity risk.
- Adjusting other assets of balance sheet
- Adjusting liability side
In adjusting assets banks can instead of paying through reserves, fulfill withdrawal requirements by adjusting other assets. Banks can either
- sell their securities
- sell their loans
- refuse a loan renewal
The second option banks have is to
- adjust their liabilities.
- Borrow from other banks or central bank
- Attracting more deposits
Mr. A has a bond of ABC Corporation. Will his return from this bond be affected by tax. Support your answer with reason.
Mr. B has a bond of that is issued by Government. Will his return from this bond be affected by tax. Support your answer with reason.
Mr. A has a bond of ABC Corporation its rate of return will be affected by the tax because the reason is that it's include in its income that government will charge the tax from the income of the person and deducted tax as income tax.
Mr. B will in other case the income of the person will not be affected because the government will deduct the tax from the dividend that has to pay to its bond holder where that person do not have to pay further tax as a part .
A part of income tax where this situation is not faced by the first case.
