Exam 10: 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

Assuming that the average duration of its assets is five years,while the average duration of its liabilities is three years,then a 5 percentage point increase in interest rates will cause the net worth of First National to decline by ________ of the total original asset value.

When banks involved in trading activities attempt to outguess markets,they are

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

The largest percentage of banks' holdings of securities consist of

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

Bank capital is equal to ________ minus ________.

Secondary reserves include

If borrowers with the most risky investment projects seek bank loans in higher proportion to those borrowers with the safest investment projects,banks are said to face the problem of

A bank with insufficient reserves can increase its reserves by

Because ________ are less liquid for the depositor than ________,they earn higher interest rates.

Bank capital is listed on the ________ side of the bank's balance sheet because it represents a ________ of funds.

Duration analysis involves comparing the average duration of the bank's ________ to the average duration of its ________.

Most of a bank's operating income results from

Which of the following is not an example of a backup line of credit?

The share of checkable deposits in total bank liabilities has

Assuming that the average duration of its assets is four years,while the average duration of its liabilities is three years,then a 5 percentage point increase in interest rates will cause the net worth of First National to ________ by ________ of the total original asset value.

When a $10 check written on the First National Bank of Chicago is deposited in an account at Citibank,then

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

Assume a bank has $200 million of assets with a duration of 2.5,and $190 million of liabilities with a duration of 1.05.If interest rates increase from 5 percent to 6 percent,the net worth of the bank falls by