Exam 12: Banking and the Management of Financial Institutions

Net profit after taxes per dollar of assets is a basic measure of bank profitability called ________.

Banks develop statistical models to calculate their maximum loss over a given time period. This approach is known as the ________.

-Assuming that the average duration of its assets is five years, while the average duration of its liabilities is three years, then a 5 percentage point increase in interest rates will cause the net worth of First National to decline by ________ of the total original asset value.

Holding large amounts of bank capital helps prevent bank failures because ________.

Which of the following is not an example of a backup line of credit?

Banks face the problem of ________ in loan markets because bad credit risks are the ones most likely to seek bank loans.

The fraction of chequable deposits that banks choose to hold are ________.

One way for banks to reduce the principal-agent problems associated with trading activities is to ________.

The amount of assets per dollar of equity capital is called the ________.

When banks calculate the losses the institution would incur if an unusual combination of bad events happened, the bank is using the ________ approach.

Which of the following would not be a way to increase the return on equity?

The principal-agent problem that exists for bank trading activities can be reduced through ________.

If, after a deposit outflow, a bank needs an additional $3 million to meet its desired reserves, the bank can ________.

Which of the following are not reported as assets on a bank's balance sheet?

-If interest rates rise by 5 percentage points, say from 10 to 15 percent, bank profits (measured using basic gap analysis)will ________.

Examples of off-balance-sheet activities include ________.

From the standpoint of ________, specialization in lending is surprising but makes perfect sense when one considers the ________ problem.

Modern liability management has resulted in ________.