Exam 19: Bank Management

An effective way to align bank managers' interests with shareholders' goal of higher returns is to compensate the managers with fixed salaries without a bonus.

A positive gap (or gap ratio of more than 1.00) suggests that rate-sensitive liabilities exceed rate-sensitive assets.

Banks can reduce their credit risk by restructuring their asset portfolio to contain fewer ____ and more ____.

During a period of ____ interest rates, a bank's net interest margin will likely ____ if its liabilities are more rate sensitive than its assets

Bank A has interest revenues of $4 million, interest expenses of $5 million, and assets totaling $20 million. Bank A's net interest margin is

If interest rates ____, banks with ____ duration gaps will be ____ affected.

When measuring exposure to market risk, banks commonly use the ________.

During a period of rising interest rates, a bank's net interest margin will likely ____ if its liabilities are ____ its assets.

Other things being equal, assets with ____ maturities and ____ frequent coupon payments have longer durations.

The say on pay rules require all decisions about executive compensation to be made only by outside directors.

Whether a bank has a temporary or a permanent need for funds, the decision should be to borrow in the federal funds market.

Most loan sales enable the bank originating the loan to continue servicing the loan.

Assume a bank accepts deposits in Australian dollars (A$) and makes some fixed-rate loans in British pounds. Which of the following would reduce the bank's profit margin?

Banks can increase their potential interest revenues by restructuring their asset portfolio to contain fewer ____ and more ____.

As the secondary market for loans has become active, banks are more able to satisfy their liquidity needs with a ____ proportion of loans while achieving ____ profitability.

A common method for banks to reduce their credit risk is to

Which of the following financial institutions would be most willing to swap variable-rate payments for fixed-rate payments in order to reduce exposure to interest rate risk?

Durango Bank has $2 million in rate-sensitive liabilities and $3 million in rate-sensitive assets. Durango's gap is ____, and Durango is probably more concerned about a(n) ____ in interest rates.

If a bank has a ____ duration gap, its average asset duration is probably ____ than its liability duration.

Which of the following is a method that a bank can use to reduce its credit risk?