FIN 3540 Exam 1

stlwalk's version from 2018-09-25 06:16


Question Answer
LIBORLondon Inter-Bank Offered Rate: Average of interest rates estimated by each of the leading banks in London that it would be charged were it to borrow from other banks
LIBOR used for:reference rate for many financial institutions - determines short term interests and benchmark rates
2008 LIBOR ScandalBanks were falsely inflating or deflating rates to profit or give the impression they were creditworthy ($9 billion in fines - 16 banks)
LIBOR affects me becauseCredit card fixed loan rate and fixed rates on student loans
Liquidityability to convert assets into cash; cash is most liquid asset
2 Major reasons financial institutions failCapital inadequacy (not enough capital to satisfy regulators, investors, customers, etc.) and illiquidity (not being able to gather sufficient cash to meet required payments (taxes, debt service, dividends, salaries, supplier invoices, etc.)