Exam 13: Banking and the Management of Financial Institutions

Assume that a customer deposits $1000 in her bank.Show in a T-account the effect of this deposit.If the bank is subject to reserve requirements (as some bank in other countries are),show in a second T-account the banks balance sheet indicating required and excess reserves,assuming a 5 percent required reserve ratio.In a third T-account,show the change in the bank's balance sheet when the bank makes loans with the excess reserves.

Credit risk management tools include ________.

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

One way for banks to reduce the principal-agent problems associated with trading activities is to ________.

Long-term customer relationships ________ the cost of information collection and make it easier to ________ credit risks.

For banks,________.

Property promised to the lender as compensation if the borrower defaults is called ________.

Because of an expected rise in interest rates in the future,a banker will likely ________.

With a 10 percent reserve requirement ratio,a $100 deposit into New Bank means that the maximum amount New Bank could lend is ________.

Measuring the sensitivity of bank profits to changes in interest rates by multiplying the gap for several maturity subintervals times the change in the interest rate is called ________.

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.The duration gap for this bank is ________.

Net profit after taxes per dollar of assets is a basic measure of bank profitability called ________.

If a bank has $100,000 of demand deposits,a desired 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 ________.

The principal-agent problem that exists for bank trading activities can be reduced through ________.

Unanticipated moral hazard contingencies can be reduced by ________.