Exam 19: Bank Management

If a bank sells interest rate futures, it ____ the potential adverse effect of rising interest rates and ____ the potential favorable effect of declining interest rates on its interest expenses.

The Sarbanes-Oxley Act has had little impact on the monitoring conducted by the board members of commercial banks.

Floating-rate loans completely eliminate interest rate risk.

When determining the appropriate interest rate to charge on a loan, a bank uses the Federal Reserve's primary credit rate as a benchmark and adds a premium to this rate for less creditworthy customers.

A bank's net interest margin is commonly defined as

A bank has a return on assets of 2 percent, $40 million in assets, and $4 million in equity. What is the return on equity?

Banks increase their risk by increasing their capital as a percentage of assets.

Which of the following financial institutions would be most willing to swap variable-rate payments for fixed-rate payments in order to reduce exposure to interest rate risk?

The measure of interest rate risk that uses the difference between rate-sensitive assets and rate-sensitive liabilities is called the

If the duration of all of a bank's assets with a maturity of greater than one year is similar to that of its liabilities with a maturity greater than one year, interest rate risk is nonexistent.

Which of the following is NOT a function of a bank's board of directors?

Because riskier assets offer ____ returns, a bank's strategy to increase its return will typically entail a(n)____ in the overall credit risk of its asset portfolio.

Which of the following is NOT a likely method used by a bank to reduce interest rate risk?

Which of the following is a method that a bank can use to reduce its credit risk?

Crazer Bank has a profit after taxes of $2 million, total assets of $100 million, and shareholders' equity of $10 million. Crazer's return on equity (ROE)is ____ percent.