$\begin{array}{lccc} \text {Cash and Treasury securities}& \text { \$ 100 million}\\ \text { FedFunds Sold }& \text { \$ 100 million}\\ \text { Resiclential Mortgages 1-4 family}& \text { \$ 200 million}\\ \text {Commercial Loans }& \text { \$ 600 million}\\ \end{array}$ Note: The residential mortgages all have a loan-to-value of between 60 and 80 percent. If the bank has capital of $50 million,what is the leverage ratio using the standardized approach?

A) 5.00 percent. B) 8.33 percent. C) 25.0 percent. D) 50.0 percent. A) 5.00 percent. B) 8.33 percent. C) 25.0 percent. D) 50.0 percent.

$\begin{array}{lccc} \text { Securities (at par) } & \text { \$ 250 Deposits}& \$975 \\ \text { Loans (at par)} & \text { \$ 760 Capital} & \$ 35 \end{array}$ If problem loans reduce the market value of the loan portfolio by 25 percent,what is the market value of capital?

A) $35 million. B) -$155 million. C) $7 million. D) -$7 million. A) $35 million. B) -$155 million. C) $7 million. D) -$7 million.

Exam 20: Capital Adequacy

The risk-adjusted asset values of OBS market contracts or derivative instruments are determined in a manner similar to the risk-adjusted asset values of contingent guarantee claims.

(True/False)

4.9/5

(85)

Question 21

Which of the following risk categories is NOT covered by the risk-based model for the life insurance industry?

(Multiple Choice)

4.8/5

(73)

Question 22

The Tier I leverage ratio measures the amount of an FI's total capital relative to total assets.

(True/False)

4.7/5

(94)

Question 23

Each of the following is a function of capital EXCEPT

(Multiple Choice)

5.0/5

(83)

Question 24

Under Basel III,Tier I capital measures the market value of common equity plus the amount of perpetual preferred stock plus minority equity interest held by the bank in subsidiaries minus goodwill.

(True/False)

4.7/5

(86)

Question 25

Under historical accounting methods for the market value of capital,FIs

(Multiple Choice)

4.9/5

(89)

Question 26

From a regulatory perspective,what is the impact on book value capital of a 25 basis point decrease in interest rates if the FI is holding a 20-year,fixed-rate,11 percent annual coupon $100,000 par value bond?

(Multiple Choice)

4.8/5

(72)

Question 27

In the NAIC model for life insurance companies,this risk measures the liquidity of liabilities for given rate changes.

(Multiple Choice)

4.9/5

(79)

Question 28

Book value accounting systems recognize the impact of interest rate problems sooner than credit risk problems.

(True/False)

4.7/5

(66)

Question 29

More frequent regulatory examinations and stricter regulator standards will cause greater discrepancies in book value of equity and the market value of equity.

(True/False)

4.9/5

(85)

Question 30

The function of capital to serve as a source of funds is critical to regulators when setting risk-based deposit insurance premiums.

(True/False)

4.9/5

(87)

Question 31

Under Basel III a depository institution's capital is divided into five categories.

(True/False)

4.9/5

(69)

Question 32

The Basel capital requirements differ from previous capital standards in all except one of the following ways?

(Multiple Choice)

4.9/5

(71)

Question 33

In evaluating the risk-adjusted asset value of foreign exchange forward contracts,the value of the current exposure can be either positive or zero.

(True/False)

4.9/5

(72)

Question 34

One function of capital is to provide funding for real assets,such as branches and technology that are necessary to provide financial services.

(True/False)

4.8/5

(85)

Question 35

Cash and Treasury securities \ 100 million FedFunds Sold \ 100 million Resiclential Mortgages 1-4 family \ 200 million Commercial Loans \ 600 million Note: The residential mortgages all have a loan-to-value of between 60 and 80 percent. If the bank has capital of $50 million,what is the leverage ratio using the standardized approach?

(Multiple Choice)

4.9/5

(83)

Question 36

An FI may be insolvent in market value terms even if the book value of equity is positive.

(True/False)

4.8/5

(85)

Question 37

The market value of capital is equal to market value of assets minus the market value of liabilities.

(True/False)

4.8/5

(96)

Question 38

Securities (at par) \ 250 Deposits \9 75 Loans (at par) \ 760 Capital \ 35 If problem loans reduce the market value of the loan portfolio by 25 percent,what is the market value of capital?

(Multiple Choice)

4.8/5

(69)

Question 39

Basel II attempts to encourage market discipline by having banks disclose capital structure,risk exposures,and capital adequacy in a systematic manner.

(True/False)

4.7/5

(93)

Question 40

Showing 21 - 40 of 139

Exam 20: Capital Adequacy

The risk-adjusted asset values of OBS market contracts or derivative instruments are determined in a manner similar to the risk-adjusted asset values of contingent guarantee claims.

Which of the following risk categories is NOT covered by the risk-based model for the life insurance industry?

The Tier I leverage ratio measures the amount of an FI's total capital relative to total assets.

Each of the following is a function of capital EXCEPT

Under Basel III,Tier I capital measures the market value of common equity plus the amount of perpetual preferred stock plus minority equity interest held by the bank in subsidiaries minus goodwill.

Under historical accounting methods for the market value of capital,FIs

From a regulatory perspective,what is the impact on book value capital of a 25 basis point decrease in interest rates if the FI is holding a 20-year,fixed-rate,11 percent annual coupon $100,000 par value bond?

In the NAIC model for life insurance companies,this risk measures the liquidity of liabilities for given rate changes.

Book value accounting systems recognize the impact of interest rate problems sooner than credit risk problems.

More frequent regulatory examinations and stricter regulator standards will cause greater discrepancies in book value of equity and the market value of equity.

The function of capital to serve as a source of funds is critical to regulators when setting risk-based deposit insurance premiums.

Under Basel III a depository institution's capital is divided into five categories.

The Basel capital requirements differ from previous capital standards in all except one of the following ways?

In evaluating the risk-adjusted asset value of foreign exchange forward contracts,the value of the current exposure can be either positive or zero.

One function of capital is to provide funding for real assets,such as branches and technology that are necessary to provide financial services.

An FI may be insolvent in market value terms even if the book value of equity is positive.

The market value of capital is equal to market value of assets minus the market value of liabilities.

Securities (at par) \ 250 Deposits \9 75 Loans (at par) \ 760 Capital \ 35 If problem loans reduce the market value of the loan portfolio by 25 percent,what is the market value of capital?

Basel II attempts to encourage market discipline by having banks disclose capital structure,risk exposures,and capital adequacy in a systematic manner.

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Securities Firms and Investment Banks

Financial Services: Mutual Fund and Hedge Fund Companies

Financial Services: Insurance Companies

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loan Risk

Credit Risk: Loan Portfolio and Concentration Risk

Liquidity Risk

Foreign Exchange Risk

Sovereign Risk

Market Risk

Off-Balance-Sheet Risk

Technology and Other Operational Risks

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

Filters