Exam 12: Banking and the Management of Financial Institutions

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. If interest rates increase from 5 percent to 6 percent, the net worth as a percentage of assets would ________ by approximately ________.

When a $10 cheque written on the First National Bank is deposited in an account at CIBC, then ________.

A bank will want to hold more excess reserves (everything else equal)when ________.

If interest rates increase from 3% to 4%, a $100,000 25 year bond with a duration of 21 years would ________ in price by approximately ________.

All else the same, if a bank's liabilities are more sensitive to interest rate fluctuations than are its assets, then ________ in interest rates will ________ bank profits.

If borrowers with the most risky investment projects seek bank loans in higher proportion to those borrowers with the safest investment projects, banks are said to face the problem of ________.

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 ________.

Traders working for banks are subject to the ________.

A $5 million deposit outflow from a bank has the immediate effect of ________.

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

The goals of bank asset management include ________.

The most important category of assets on a bank's balance sheet is ________.

Duration analysis involves comparing the average duration of the bank's ________ to the average duration of its ________.

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

Bank's make their profits primarily by issuing ________.

If a bank has excess reserves greater than the amount of a deposit outflow, the outflow will result in equal reductions in ________.

When a new depositor opens a chequing account at the First National Bank, the bank's assets ________ and its liabilities ________.

Which of the following statements is false?

Which of the following are primary concerns of the bank manager?

In general, banks would prefer to acquire funds quickly by ________ rather than ________.