Exam 20: Bank Performance

Gross interest expenses of banks are normally higher in periods when market interest rates are higher

Banks G and H are the same size and have similar operations. Bank G holds the minimum level of capital, and Bank H holds a higher level of capital. Bank G's return on equity is probably ____volatile than that of Bank H. Bank G's risk premium is probably ____ than that of Bank H.

Banks increase their loan loss reserves in order to boost their reported earnings.

Any individual bank's ROA depends on the bank's policy decisions, but not on uncontrollable factors relating to the economy and government regulations.

Changes in ____ are a factor affecting the value of a commercial bank over which the bank has some control.

____ result(s) from a bank's sale of securities.

The value of a commercial bank can be modeled as the present value of its future cash flows.

A bank's net interest margin includes

The loan loss provision should increase during periods when loan losses are more likely, such as during a recessionary period.

When only equity counts as capital, the higher the capital ratio, the

A bank's return on assets (ROA) could be lower than desired because of all of the following except:

Gross interest expense is affected by

Which of the following banks would likely have the highest return on equity?

A bank's ROA ____ account for taxes on earnings. A bank's ROE ____ account for taxes on earnings.

The accounting process used by banks to determine their earnings is still based on subjective decisions, so the earnings of a bank are partially influenced by the accounting decisions regardingloan losses.

If a bank increases its provisions for loan losses, its interest income is ____, and its noninterest income is ____.

During the credit crisis, the level of ____ was much higher than in other periods.

The sum of net interest income, noninterest income, and securities gains, minus the provision for loan losses and noninterest expenses equals