Exam 34: Banks

Which of the following are included in other comprehensive income? I.Hedging activities. II.Foreign-currency translation items. III.Unrealized losses on debt investments. IV.Unrealized gains on equity investments.

Since the financial crisis ended in 2010,which of the following has been the usual ordering of the absolute values of the types of loan losses to banks?

The tax penalty on equity is a minor cost to a bank,and to simplify results,it can usually be left out of the valuation process.

For financial institutions,which of the following is NOT true concerning trading income?

Which of the following best describes maturity mismatch and its role in bank operations?

Which of the following is most often the largest source,in absolute value terms,of loan losses for a bank?

Which of the following correctly ranks the sources of income for European banks over the period 1988-2013?

Economic spread analysis allows for understanding how much value a bank is creating in its different product lines.

The best method for understanding how much value a bank is creating in its different product lines is:

Given the following information,determine the net income (NI )of the bank.The loan and deposit rates are 12 percent and 3 percent,respectively.The money rate is 2 percent,and it is the benchmark of the profitability of loans and deposits.It is also the measure used to debit the lack of earning ability of cash reserves at the Federal Reserve,and it is the opportunity cost of equity capital.Other expenses are $40 million.The balance sheet information is in millions of dollars. A ssets Liabilities Cash Reserves \ 190 Deposits \ 890 Loans 780 Equity 80 Total Assets \ 970

Explain why analysts estimating the values of banks should not use the discounted cash flow from operations method.What method should an analyst use?

Which of the following is NOT true concerning loan losses for a bank?

Most banks have a maturity mismatch as a result of using short-term deposits as funding to back long-term loans and mortgages.In this case,the bank earns income from being on different parts of the yield curve: typically,borrowing for the short term costs less than what the bank can earn from long-term lending.

Which of the following will change the cost of equity? I.Asset composition. II.Liability composition. III.The expected market return. IV.The risk-free rate.

Up until the financial crisis of 2008,which of the following was the usual ordering of the absolute values of the types of loan losses to banks?