Exam 9: Banking and the Management of Financial Institutions

Measuring the sensitivity of bank profits to changes in interest rates by multiplying the gap times the change in the interest rate is called

Banks that suffered significant losses in the 1980s made the mistake of

Secondary reserves include

Bank capital has both benefits and costs for the bank owners. Higher bank capital ________ the likelihood of bankruptcy,but higher bank capital ________ the return on equity for a given return on assets.

Of the following methods that banks might use to reduce moral hazard problems,the one not legally permitted in the United States is the

Holding all else constant,when a bank receives the funds for a deposited check

From the standpoint of ________,specialization in lending is surprising but makes perfect sense when one considers the ________ problem.

If a bank has $10 million of checkable deposits,a required reserve ratio of 10 percent,and it holds $2 million in reserves,then it will not have enough reserves to support a deposit outflow of

When a bank suspects that a $1 million loan might prove to be bad debt that will have to be written off in the future the bank

For banks

If interest rates increase from 9 percent to 10 percent,a bank with a duration gap of 2 years would experience a decrease in its net worth of

If a bank has excess reserves greater than the amount of a deposit outflow,the outflow will result in equal reductions in

When a lender refuses to make a loan,although borrowers are willing to pay the stated interest rate or even a higher rate,the bank is said to engage in

Which of the following are reported as assets on a bank's balance sheet?

If a banker expects interest rates to fall in the future,her best strategy for the present is

If a bank has $100,000 of checkable deposits,a required reserve ratio of 20 percent,and it holds $40,000 in reserves,then the maximum deposit outflow it can sustain without altering its balance sheet is

A bank is insolvent when

If a bank needs to raise the amount of capital relative to assets,a bank manager might choose to

Which of the following are reported as liabilities on a bank's balance sheet?

When banks calculate the losses the institution would incur if an unusual combination of bad events happened,the bank is using the ________ approach.