Exam 12: Banking and the Management of Financial Institutions

Which of the following statements most accurately describes the task of bank asset management?

Which of the following statements is true?

Off-balance sheet activities involving guarantees of securities and back-up credit lines ________.

What are the main items in a bank's asset side of the balance sheet? Discuss them briefly.

The difference of rate-sensitive liabilities and rate-sensitive assets is known as the ________.

A reason why rogue traders have bankrupt their banks is due to ________.

Which of the following are reported as liabilities on a bank's balance sheet?

For banks, ________.

If a bank's liabilities are more sensitive to interest rate movements than are its assets, then ________.

If a bank has ________ rate-sensitive assets than liabilities, then ________ in interest rates will increase bank profits.

Bank reserves include ________.

Explain the relationship between return on assets and return on equity. What incentives does this relationship give a bank manager? Is this the desired outcome preferred by regulators? Discuss.

If a bank has $10 million of demand deposits, a desired reserve ratio of 10 percent, and it holds $2 million in reserves, then it will not have enough reserves to support a deposit outflow of ________.

When you deposit $50 in your account at First National Bank and a $100 cheque you have written on this account is cashed at Chemical Bank, then ________.

When $1 million is deposited at a bank, the desired reserve ratio is 20 percent, and the bank chooses not to make any loans but to hold excess reserves instead, then, in the bank's final balance sheet, ________.

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

Using T-accounts show what happens to reserves at New National Bank if one individual deposits $1000 in cash into her chequing account and another individual withdraws $750 in cash from her chequing account.

Which of the following are reported as liabilities on a bank's balance sheet?

When banks involved in trading activities attempt to outguess markets, they are ________.

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