Question 1

The return on assets ratio is the product of the profit margin and asset utilization.

Accepted Answer

A) True 
 B)False  True

Question 2

The _____ ratio gives actual losses on loans, while the ______ ratio gives the extent to which the bank's assets are devoted to loans.

Accepted Answer

A)  loan risk; loss rate 
B)  loss rate; capitalization 
C)  operating efficiency; loan risk 
D)  loss rate; loan risk 
A)  loan risk; loss rate 
B)  loss rate; capitalization 
C)  operating efficiency; loan risk 
D)  loss rate; loan risk D

Question 3

Interest revenue is calculated on an accrual system.

Accepted Answer

A) True 
 B)False  True

Question 4

If a firm has $250,000 in securities, $40,000 due from other institutions, $22,000 in cash, and $8 million in total assets, its cash ratio equals:

Accepted Answer

A)  3.9% 
B)  0.78% 
C)  0.28% 
D)  0.50% 
E)  none of the above. 
A)  3.9% 
B)  0.78% 
C)  0.28% 
D)  0.50% 
E)  none of the above.

Question 5

Net loans is obtained by subtracting unearned income and the provision for loan losses from gross loans.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following internal performance evaluation methods subtracts the opportunity cost of capital from adjusted earnings?

Accepted Answer

A)  EVA 
B)  ROA 
C)  RAROC 
D)  none of the above 
A)  EVA 
B)  ROA 
C)  RAROC 
D)  none of the above

Question 7

Other real estate is principally furniture and equipment.

Accepted Answer

A) True 
 B)False

Question 8

Money market deposit accounts are savings accounts on which the bank pays interest and check writing is limited to a certain number of checks per month.

Accepted Answer

A) True 
 B)False

Question 9

Internal bank performance includes which of the following:

Accepted Answer

A)  bank planning 
B)  technology assessment 
C)  personnel development 
D)  all of the above. 
A)  bank planning 
B)  technology assessment 
C)  personnel development 
D)  all of the above.

Question 10

If a bank earns 5% on a tax-free municipal security, and the bank is in the 35% federal income tax bracket, the tax equivalent yield on the security is:

Accepted Answer

A)  14.3% 
B)  7.7% 
C)  17.5% 
D)  none of the above. 
A)  14.3% 
B)  7.7% 
C)  17.5% 
D)  none of the above.

Question 11

Which of the following is a characteristic of strategic planning?

Accepted Answer

A)  it focuses on cost efficiency 
B)  it must be consistent with the bank's budget 
C)  it is creative by nature 
D)  a and b 
E)  a, b, and c 
A)  it focuses on cost efficiency 
B)  it must be consistent with the bank's budget 
C)  it is creative by nature 
D)  a and b 
E)  a, b, and c

Question 12

The operating efficiency ratios calculated to provide information on cost control include all of the following EXCEPT:

Accepted Answer

A)  depository ratio 
B)  occupancy ratio 
C)  wages and salaries expense rate 
D)  interest expense ratio 
A)  depository ratio 
B)  occupancy ratio 
C)  wages and salaries expense rate 
D)  interest expense ratio

Question 13

Cash assets include which of the following?

Accepted Answer

A)  vault cash 
B)  deposits at the Federal Reserve and at other commercial banks 
C)  cash items in the process of collection 
D)  all of the above. 
A)  vault cash 
B)  deposits at the Federal Reserve and at other commercial banks 
C)  cash items in the process of collection 
D)  all of the above.

Question 14

The ratio that best measures the tax exposure of a bank is ____ divided by _____.

Accepted Answer

A)  total taxes paid divided by net income before taxes 
B)  net income before taxes divided by total taxes paid 
C)  municipal bond rate divided by marginal tax rate 
D)  net income before taxes divided by (1-marginal tax rate) 
A)  total taxes paid divided by net income before taxes 
B)  net income before taxes divided by total taxes paid 
C)  municipal bond rate divided by marginal tax rate 
D)  net income before taxes divided by (1-marginal tax rate)

Question 15

Return on equity is obtained by multiplying the return on assets by the ratio of equity to assets.

Accepted Answer

A) True 
 B)False

Question 16

Decreasing the amount of liquid assets held for the purpose of meeting loan demands and deposit withdrawals and increasing the usage of deposit and nondeposit sources of funds paying market rates of interest is known as:

Accepted Answer

A)  liquidity management 
B)  leverage adjustment 
C)  liability management 
D)  liquidity adjustment 
A)  liquidity management 
B)  leverage adjustment 
C)  liability management 
D)  liquidity adjustment

Question 17

Which of the following internal performance evaluation methods focuses on shareholder wealth maximization?

Accepted Answer

A)  EVA 
B)  ROA 
C)  RAROC 
D)  a and c 
E)  a, b, and c 
A)  EVA 
B)  ROA 
C)  RAROC 
D)  a and c 
E)  a, b, and c

Question 18

Banks quantify goals and formalize the planning process by using:

Accepted Answer

A)  budgets 
B)  profit plans 
C)  objectives 
D)  a and b 
E)  a, b, and c 
A)  budgets 
B)  profit plans 
C)  objectives 
D)  a and b 
E)  a, b, and c

Question 19

If a bank earns 4% on a tax-free municipal security, and is in the 35% federal tax bracket, the tax equivalent yield on that security is 11.4%.

Accepted Answer

A) True 
 B)False

Question 20

Provision for loan losses is used as a measure of asset quality.

Accepted Answer

A) True 
 B)False

The return on assets ratio is the product of the profit margin and asset utilization.

The _ ratio gives actual losses on loans, while the __ ratio gives the extent to which the bank's assets are devoted to loans.

Interest revenue is calculated on an accrual system.

If a firm has $250,000 in securities, $40,000 due from other institutions, $22,000 in cash, and $8 million in total assets, its cash ratio equals:

Net loans is obtained by subtracting unearned income and the provision for loan losses from gross loans.

Which of the following internal performance evaluation methods subtracts the opportunity cost of capital from adjusted earnings?

Other real estate is principally furniture and equipment.

Money market deposit accounts are savings accounts on which the bank pays interest and check writing is limited to a certain number of checks per month.

Internal bank performance includes which of the following:

If a bank earns 5% on a tax-free municipal security, and the bank is in the 35% federal income tax bracket, the tax equivalent yield on the security is:

Which of the following is a characteristic of strategic planning?

The operating efficiency ratios calculated to provide information on cost control include all of the following EXCEPT:

Cash assets include which of the following?

The ratio that best measures the tax exposure of a bank is divided by _.

Return on equity is obtained by multiplying the return on assets by the ratio of equity to assets.

Decreasing the amount of liquid assets held for the purpose of meeting loan demands and deposit withdrawals and increasing the usage of deposit and nondeposit sources of funds paying market rates of interest is known as:

Which of the following internal performance evaluation methods focuses on shareholder wealth maximization?

Banks quantify goals and formalize the planning process by using:

If a bank earns 4% on a tax-free municipal security, and is in the 35% federal tax bracket, the tax equivalent yield on that security is 11.4%.

Provision for loan losses is used as a measure of asset quality.

Functions and Forms of Banking

The Bank Regulatory Environment

Bank Valuation

An Overview of Assetliability Management Alm

Techniques of Assetliability Management: Futures, Options, and Swaps

Investment Management

Credit Evaluation Process

Commercial and Industrial Lending

Real Estate and Consumer Lending

Liquidity Management

Capital Management

Managing Liabilities

Off-Balance Sheet Activities

Securities, Investment Insurance Products

Other Financial Services

Electronic Banking

Global Financial Services

Filters

Exam 3: Evaluating Bank Performance

The return on assets ratio is the product of the profit margin and asset utilization.

The _____ ratio gives actual losses on loans, while the ______ ratio gives the extent to which the bank's assets are devoted to loans.

Interest revenue is calculated on an accrual system.

If a firm has $250,000 in securities, $40,000 due from other institutions, $22,000 in cash, and $8 million in total assets, its cash ratio equals:

Net loans is obtained by subtracting unearned income and the provision for loan losses from gross loans.

Which of the following internal performance evaluation methods subtracts the opportunity cost of capital from adjusted earnings?

Other real estate is principally furniture and equipment.

Money market deposit accounts are savings accounts on which the bank pays interest and check writing is limited to a certain number of checks per month.

Internal bank performance includes which of the following:

If a bank earns 5% on a tax-free municipal security, and the bank is in the 35% federal income tax bracket, the tax equivalent yield on the security is:

Which of the following is a characteristic of strategic planning?

The operating efficiency ratios calculated to provide information on cost control include all of the following EXCEPT:

Cash assets include which of the following?

The ratio that best measures the tax exposure of a bank is ____ divided by _____.

Return on equity is obtained by multiplying the return on assets by the ratio of equity to assets.

Decreasing the amount of liquid assets held for the purpose of meeting loan demands and deposit withdrawals and increasing the usage of deposit and nondeposit sources of funds paying market rates of interest is known as:

Which of the following internal performance evaluation methods focuses on shareholder wealth maximization?

Banks quantify goals and formalize the planning process by using:

If a bank earns 4% on a tax-free municipal security, and is in the 35% federal tax bracket, the tax equivalent yield on that security is 11.4%.

Provision for loan losses is used as a measure of asset quality.

Functions and Forms of Banking

The Bank Regulatory Environment

Bank Valuation

An Overview of Assetliability Management Alm

Techniques of Assetliability Management: Futures, Options, and Swaps

Investment Management

Credit Evaluation Process

Commercial and Industrial Lending

Real Estate and Consumer Lending

Liquidity Management

Capital Management

Managing Liabilities

Off-Balance Sheet Activities

Securities, Investment Insurance Products

Other Financial Services

Electronic Banking

Global Financial Services

Filters

The _ ratio gives actual losses on loans, while the __ ratio gives the extent to which the bank's assets are devoted to loans.

The ratio that best measures the tax exposure of a bank is divided by _.