Question 1

Measured by dollar volume,the largest category of capital at U.S.banks is:

Accepted Answer

A) par value of common stock. 
B) subordinated notes and debentures. 
C) surplus. 
D) undivided profits and capital reserves. 
E) None of the options is correct. 
A) par value of common stock. 
B) subordinated notes and debentures. 
C) surplus. 
D) undivided profits and capital reserves. 
E) None of the options is correct.

Question 2

Why do regulators prefer higher capital requirements?

Accepted Answer

A) It justifies the existence of regulatory agencies. 
B) It protects the deposit insurance fund from serious losses. 
C) It enhances bank asset quality. 
D) It decreases bank profitability. 
E) It increases bank leverage. 
A) It justifies the existence of regulatory agencies. 
B) It protects the deposit insurance fund from serious losses. 
C) It enhances bank asset quality. 
D) It decreases bank profitability. 
E) It increases bank leverage.

Question 3

_________________________ are the net earnings of a bank,which have been kept by the bank rather than being distributed as dividends to stockholders.

Accepted Answer

Undivided

Question 4

According to the textbook,capital and risk are intimately related to each other.

Accepted Answer

A) True 
 B)False

Question 5

Deposit insurance subsidized by government encourages banks to increase their ratios of capital to deposits.

Accepted Answer

A) True 
 B)False

Question 6

________________________ represent(s)funds set aside for contingencies,such as legal action against the institution or a sinking fund to retire stock or debt in the future.

Accepted Answer

A) Undivided profits 
B) Surplus 
C) Preferred stock 
D) Common stock 
E) Equity reserves 
A) Undivided profits 
B) Surplus 
C) Preferred stock 
D) Common stock 
E) Equity reserves

Question 7

A bank has a profit margin of 5 percent,an asset utilization ratio of 11 percent,an equity multiplier of 12,and a retention ratio of 60 percent.What is this bank's ICGR?

Accepted Answer

A) 6.60 percent 
B) 3.96 percent 
C) 7.20 percent 
D) 0.33 percent 
E) None of the options is correct. 
A) 6.60 percent 
B) 3.96 percent 
C) 7.20 percent 
D) 0.33 percent 
E) None of the options is correct.

Question 8

Possible breakdowns in quality control,inefficiencies in producing and delivering financial services,weather damage,aging or faulty computer systems,and errors in judgment by bank management illustrate what form of risk faced by banks?

Accepted Answer

A) Credit risk 
B) Liquidity risk 
C) Interest-rate risk 
D) Operational risk 
E) None of the options is correct. 
A) Credit risk 
B) Liquidity risk 
C) Interest-rate risk 
D) Operational risk 
E) None of the options is correct.

Question 9

A standby letter of credit,backing the issue of state and local government general obligation bonds,is given a credit risk-weight of 20 percent because of its:

Accepted Answer

A) modest credit risk. 
B) zero credit risk. 
C) moderate credit risk. 
D) low credit risk. 
E) highest credit risk. 
A) modest credit risk. 
B) zero credit risk. 
C) moderate credit risk. 
D) low credit risk. 
E) highest credit risk.

Question 10

The following are the advantages of Basel II over Basel I except that:

Accepted Answer

A) it performs supervisory review of each bank's risk-assessment procedures. 
B) it provides for greater sensitivity to arbitrage and financial innovations. 
C) it applies the same minimum capital requirements to all banks. 
D) it broadens the types of risk considered. 
E) All are advantages of using Basel II. 
A) it performs supervisory review of each bank's risk-assessment procedures. 
B) it provides for greater sensitivity to arbitrage and financial innovations. 
C) it applies the same minimum capital requirements to all banks. 
D) it broadens the types of risk considered. 
E) All are advantages of using Basel II.

Question 11

A bank has a ROE of 14 percent and a ROA of 2 percent.What is this bank's equity capital to total assets ratio?

Accepted Answer

A) 7.00 percent 
B) 14.29 percent 
C) 28.00 percent 
D) 16.00 percent 
E) None of the options is correct. 
A) 7.00 percent 
B) 14.29 percent 
C) 28.00 percent 
D) 16.00 percent 
E) None of the options is correct.

Question 12

Which of the following is in the 100 percent risk-weight category?

Accepted Answer

A) Cash 
B) General obligation municipal bonds 
C) Residential mortgage loans 
D) Credit card loans 
E) None of the options is correct. 
A) Cash 
B) General obligation municipal bonds 
C) Residential mortgage loans 
D) Credit card loans 
E) None of the options is correct.

Question 13

Which of the following would be an example of Tier 1 capital?

Accepted Answer

A) Subordinated debt capital instruments with an original maturity of at least 5 years 
B) Allowance for loan and lease losses 
C) Minority interest in the equity accounts of consolidated subsidiaries 
D) Intermediate-term preferred stock 
E) All of the options are correct. 
A) Subordinated debt capital instruments with an original maturity of at least 5 years 
B) Allowance for loan and lease losses 
C) Minority interest in the equity accounts of consolidated subsidiaries 
D) Intermediate-term preferred stock 
E) All of the options are correct.

Question 14

The latest revision to the Basel accord is known as __________ and will cover capital,liquidity,and debt positions of individual international banks and also the much broader issues associated with controlling global business cycles and financial system-wide risks.

Accepted Answer

The answer of The latest revision to the Basel accord...

Question 15

Which of the following would be an example of operational risk?

Accepted Answer

A) A robber steals $250,000 from the bank locker. 
B) An out-of-date computer system causes the bank to lose $750,000. 
C) A bank is forced to sell $1,000,000 in loans,at a loss,in order to meet the needs of depositors. 
D) A $500,000 loan that the bank has made has been deemed uncollectible. 
E) None of the examples are of operational risk. 
A) A robber steals $250,000 from the bank locker. 
B) An out-of-date computer system causes the bank to lose $750,000. 
C) A bank is forced to sell $1,000,000 in loans,at a loss,in order to meet the needs of depositors. 
D) A $500,000 loan that the bank has made has been deemed uncollectible. 
E) None of the examples are of operational risk.

Question 16

Smaller banks rely more heavily on internally generated capital than larger banks.

Accepted Answer

A) True 
 B)False

Question 17

The First National Bank of Tucson has determined that the value of their property in Tucson has tripled in the last three years.They decide that they would like to use this property to raise funds and will rent space from the new owners of the building.What way of meeting their capital needs is the bank taking?

Accepted Answer

A) Issuing common stock 
B) Issuing preferred stock 
C) Issuing subordinated notes and debentures 
D) Selling assets and leasing facilities 
E) Swapping stock for debt instruments 
A) Issuing common stock 
B) Issuing preferred stock 
C) Issuing subordinated notes and debentures 
D) Selling assets and leasing facilities 
E) Swapping stock for debt instruments

Question 18

Which of the following would be an example of Tier 2 capital?

Accepted Answer

A) Subordinated debt capital instruments 
B) Undivided profits 
C) Minority interest in the equity accounts of consolidated subsidiaries 
D) Qualifying noncumulative preferred stock 
E) All of the options are correct. 
A) Subordinated debt capital instruments 
B) Undivided profits 
C) Minority interest in the equity accounts of consolidated subsidiaries 
D) Qualifying noncumulative preferred stock 
E) All of the options are correct.

Question 19

The risk that has to do with fraud,embezzlement and bank robberies is called _________________.

Accepted Answer

The answer of The risk that has to do with...

Question 20

The global financial crisis of 2007-2009 highlighted the importance of taking into consideration a bank's exposure to market risk that arise from changes in interest rates,security prices,and currency.

Accepted Answer

A) True 
 B)False

Measured by dollar volume,the largest category of capital at U.S.banks is:

Why do regulators prefer higher capital requirements?

_________________________ are the net earnings of a bank,which have been kept by the bank rather than being distributed as dividends to stockholders.

According to the textbook,capital and risk are intimately related to each other.

Deposit insurance subsidized by government encourages banks to increase their ratios of capital to deposits.

________________________ represent(s)funds set aside for contingencies,such as legal action against the institution or a sinking fund to retire stock or debt in the future.

A bank has a profit margin of 5 percent,an asset utilization ratio of 11 percent,an equity multiplier of 12,and a retention ratio of 60 percent.What is this bank's ICGR?

Possible breakdowns in quality control,inefficiencies in producing and delivering financial services,weather damage,aging or faulty computer systems,and errors in judgment by bank management illustrate what form of risk faced by banks?

A standby letter of credit,backing the issue of state and local government general obligation bonds,is given a credit risk-weight of 20 percent because of its:

The following are the advantages of Basel II over Basel I except that:

A bank has a ROE of 14 percent and a ROA of 2 percent.What is this bank's equity capital to total assets ratio?

Which of the following is in the 100 percent risk-weight category?

Which of the following would be an example of Tier 1 capital?

The latest revision to the Basel accord is known as __________ and will cover capital,liquidity,and debt positions of individual international banks and also the much broader issues associated with controlling global business cycles and financial system-wide risks.

Which of the following would be an example of operational risk?

Smaller banks rely more heavily on internally generated capital than larger banks.

Which of the following would be an example of Tier 2 capital?

The risk that has to do with fraud,embezzlement and bank robberies is called _________________.

The global financial crisis of 2007-2009 highlighted the importance of taking into consideration a bank's exposure to market risk that arise from changes in interest rates,security prices,and currency.

An Overview of the Changing Financial-Services Sector

The Impact of Government Policy and Regulation on the Financial-Services Industry

The Organization and Structure of Banking and the Financial-Services Industry

Establishing New Banks, Branches, ATMs, Telephone Services, and Websites

The Financial Statements of Banks and Their Principal Competitors

Measuring and Evaluating the Performance of Banks and Their Principal Competitors

Risk Management for Changing Interest Rates: Asset-Liability Management and Duration Techniques

Investment Banking,Insurance,and Other Sources of Fee Income

Risk Management: Asset-Backed Securities, Loan Sales, Credit Standbys, and Credit Derivatives

The Investment Function in Financial-Services Management

Liquidity and Reserves Management: Strategies and Policies

Managing and Pricing Deposit Services

Managing Nondeposit Liabilities

Investment Banking, insurance, and Other Sources of Fee Income

Lending Policies and Procedures: Managing Credit Risk

Lending to Business Firms and Pricing Business Loans

Consumer Loans, Credit Cards, and Real Estate Lending

Acquisitions and Mergers in Financial-Services Management

International Banking and the Future of Banking and Financial Services

Filters

Exam 15: The Management of Capital

Measured by dollar volume,the largest category of capital at U.S.banks is:

Why do regulators prefer higher capital requirements?

_________________________ are the net earnings of a bank,which have been kept by the bank rather than being distributed as dividends to stockholders.

According to the textbook,capital and risk are intimately related to each other.

Deposit insurance subsidized by government encourages banks to increase their ratios of capital to deposits.

________________________ represent(s)funds set aside for contingencies,such as legal action against the institution or a sinking fund to retire stock or debt in the future.

A bank has a profit margin of 5 percent,an asset utilization ratio of 11 percent,an equity multiplier of 12,and a retention ratio of 60 percent.What is this bank's ICGR?

Possible breakdowns in quality control,inefficiencies in producing and delivering financial services,weather damage,aging or faulty computer systems,and errors in judgment by bank management illustrate what form of risk faced by banks?

A standby letter of credit,backing the issue of state and local government general obligation bonds,is given a credit risk-weight of 20 percent because of its:

The following are the advantages of Basel II over Basel I except that:

A bank has a ROE of 14 percent and a ROA of 2 percent.What is this bank's equity capital to total assets ratio?

Which of the following is in the 100 percent risk-weight category?

Which of the following would be an example of Tier 1 capital?

The latest revision to the Basel accord is known as __________ and will cover capital,liquidity,and debt positions of individual international banks and also the much broader issues associated with controlling global business cycles and financial system-wide risks.

Which of the following would be an example of operational risk?

Smaller banks rely more heavily on internally generated capital than larger banks.

Which of the following would be an example of Tier 2 capital?

The risk that has to do with fraud,embezzlement and bank robberies is called _________________.

The global financial crisis of 2007-2009 highlighted the importance of taking into consideration a bank's exposure to market risk that arise from changes in interest rates,security prices,and currency.

An Overview of the Changing Financial-Services Sector

The Impact of Government Policy and Regulation on the Financial-Services Industry

The Organization and Structure of Banking and the Financial-Services Industry

Establishing New Banks, Branches, ATMs, Telephone Services, and Websites

The Financial Statements of Banks and Their Principal Competitors

Measuring and Evaluating the Performance of Banks and Their Principal Competitors

Risk Management for Changing Interest Rates: Asset-Liability Management and Duration Techniques

Investment Banking,Insurance,and Other Sources of Fee Income

Risk Management: Asset-Backed Securities, Loan Sales, Credit Standbys, and Credit Derivatives

The Investment Function in Financial-Services Management

Liquidity and Reserves Management: Strategies and Policies

Managing and Pricing Deposit Services

Managing Nondeposit Liabilities

Investment Banking, insurance, and Other Sources of Fee Income

Lending Policies and Procedures: Managing Credit Risk

Lending to Business Firms and Pricing Business Loans

Consumer Loans, Credit Cards, and Real Estate Lending

Acquisitions and Mergers in Financial-Services Management

International Banking and the Future of Banking and Financial Services

Filters