Exam 13: Banking and the Management of Financial Institutions

In order to reduce the ________ problem in loan markets,bankers collect information from prospective borrowers to screen out the bad credit risks from the good ones.

Banks develop statistical models to calculate their maximum loss over a given time period.This approach is known as the ________.

Bankers' concerns regarding the optimal mix of excess reserves,secondary reserves,borrowings from the Bank of Canada,and borrowings from other banks to deal with deposit outflows is an example of ________.

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 ________.

The quantity defined as interest income minus interest expenses divided by assets is a measure of bank performance known as ________.

Of the following,which would be the first choice for a bank facing a reserve deficiency?

For a given return on assets,the lower is bank capital,________.

Bank's make their profits primarily by issuing ________.

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

Holding all else constant,when a bank receives the funds for a deposited cheque,________.

Provisions in loan contracts that prohibit borrowers from engaging in specified risky activities are called ________.

If a bank has ________ rate-sensitive assets than liabilities,a ________ in interest rates will reduce bank profits,while a ________ in interest rates will raise bank profits.

Credit Atlantic Bank has the following balance sheet: The bank's desired reserve ratio is 10 percent and there is a withdrawal of cash from chequable deposits equal to $20.Describe what is likely to happen in the bank's balance sheet and produce the new balance sheet for Credit Atlantic Bank.

Because borrowers,once they have a loan,are more likely to invest in high-risk investment projects,banks face the ________.

When a new depositor opens a chequing account at the First National Bank,the bank's assets ________ and its liabilities ________.

As the costs associated with deposit outflows ________,the banks willingness to hold excess reserves will ________.

Which of the following bank assets is the most liquid?

Because of their ________ liquidity,________ government securities are called secondary reserves.

Explain using an example the statement that "given the return on assets,the lower the bank capital,the higher the return for the owners of the bank."

Secondary reserves are so called because ________.