Money and banking
Instructions
Question 1:You have the following bond maturing in 7 years:Face Value = 1.000$;Annual coupons = 70$;Annual Interest rate= 6%1. Compute the PV of the bond? 2. What will happen to the bond price if the interest rate increases to 6%?3. Compute both the duration and the modified duration of the bond?4. Interpret your results in question 3?Question 2: Explain in details how banks operates and analyze the impact of technological advances on the functioning/ business of banks ? (use your own words)Question 3: Explain the evolution of money throughout history and its different usage by giving examples?Question 4: Describe in details the Moroccan financial system, its components, its strengths as well as weaknesses? (again use your own words)
Answer
Question 1The present value of a bond is the discounting of the bond's future cash payments by the currentinterest ratePresent value of bonds= Present Value Paid at Maturity + Present Value of Interest PaymentsPV= $ 665.06 + $ 390.77 = $ 1,055.83.The growth of the interest rate to 6% will result in growth in the value of the bond in the future. The duration of the bond is 7 years. The changes in interest will increase the bond duration. The fluctuation in bond prices occur because of the changes in the interest rates.Question 2Bank business entails the depositing and borrowing of cash as the primary source of revenue. Some banks deal with other financial derivatives, but the primary business is deposit and issuance of loans. Customers who have bank accounts with these financial institution...
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