Exam 19: Bank Management

Banks can resolve a liquidity problem by

Assume a U.S. bank accepts deposits in dollars and made some fixed-rate loans in British pounds. Which of the following would reduce the bank's profit margin?

If a bank has a ____ duration gap, its average asset duration is probably ____ than its liability duration.

If a bank expects interest rates to consistently ____ over time, it will consider allocating most of its funds to rate-____ assets.

If a bank has assets and liabilities in dollars and euros, its exposure to interest rate risk can best be minimized if the

The duration of zero-coupon bonds will be ____ the duration of coupon bonds with the same maturity.

Banks generally ____ loans and ____ their purchases of low-risk securities when the economy is weak.

____ is (are)least likely to be used as a method of reducing interest rate risk.

A common method for banks to reduce their credit risk is to

____ is NOT a method used to assess interest rate risk.

The greater the ____, the greater the amount of assets per dollar's worth of equity.

When measuring exposure to market risk, banks commonly use the ________.

As the secondary market for loans has become active, banks can attempt to satisfy their liquidity needs with a ____ proportion of loans while achieving ____ profitability.

For most banks, the average duration of assets ____ the average duration of liabilities, so the duration gap is ____.

The ____ of interest rate futures ____ the potential adverse effect of rising interest rates on a bank's interest expenses.

Banks would reduce their liquidity by restructuring their asset portfolio to contain fewer ____ and more ____.

The performance of a bank that continually concentrates on short-term deposits in euros and adjustable-rate dollar loans with equal rate sensitivity is

Banks tend to focus their loans in one industry so that they can specialize on that industry and reduce the credit risk of their loan portfolio.

Banks can improve their liquidity position by restructuring their asset portfolio to contain fewer ____ and more ____.

If a bank expects interest rates to consistently ____ over time, it will consider allocating most funds to rate-____ assets.