Exam 19: Bank Management

If a bank sells interest rate futures, it ____ of rising interest rates and ____ of declining interest rates on its interest expenses.

Petri Bank had interest revenues of $70 million last year and $30 million in interest expenses. About $300 million of Petri's $800 million in assets are rate sensitive, while $600 million of itsliabilities are rate sensitive. Petri Bank's net interest margin is ____ percent.

If a bank desires to maximize its net interest margin, it would best achieve its goal by attempting to obtain most of its funds through ____ and use most of its funds for ____ (assuming thatallloans will be repaid).

Because riskier assets offer ____ returns, a bank's strategy to increase its return will typically entail a(n) ____ in the overall credit risk of its asset portfolio.

____ is not a method used to assess interest rate risk.

Each bank may have its own classification system of interest rate sensitivity, because there is no perfect measurement of the gap.

Banks would reduce their liquidity by restructuring their asset portfolio to contain fewer ____ and more ____.

Banks are more liquid as a result of securitization because it allows them to request repayment of the loan principal from the borrower upon demand.

A bank's net interest margin is commonly defined as

When determining the appropriate interest rate to charge on a loan, a bank uses the Federal Reserve's primary credit lending rate as a benchmark and adds a premium to this rate for less creditworthy customers.

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

Which of the following is not a function of a bank's board of directors?

If a bank has assets and liabilities in dollars and euros, its exposure to interest rate risk can best be minimized if the