Question 1

The bank's ROA is

Accepted Answer

A) 1.31 percent. 
B) 1.78 percent. 
C) 1.26 percent. 
D) 0.89 percent. 
E) None of these choices are correct. 
A) 1.31 percent. 
B) 1.78 percent. 
C) 1.26 percent. 
D) 0.89 percent. 
E) None of these choices are correct.

Question 2

A municipal bond is paying a 6 percent annual yield. An equivalent risk corporate bond is paying 7 percent. Investors with a tax rate of ________ or higher would prefer the municipal bond.

Accepted Answer

A) 65.13 percent 
B) 14.28 percent 
C) 25.00 percent 
D) 80.75 percent 
E) 25.75 percent 
A) 65.13 percent 
B) 14.28 percent 
C) 25.00 percent 
D) 80.75 percent 
E) 25.75 percent

Question 3

MMDAs are a type of savings account that has some limited checking features. These accounts were designed to help banks compete with MMMFs.

Accepted Answer

A) True 
 B)False

Question 4

What is the bank's NIM? Is the bank performing better or worse than average? In what area is the bank performing better or worse than average? How could the bank improve if necessary?
NIM = (Interest revenue − Interest expense)/(Securities + Loans)
[(475 × .045)+ (725 × .075)− (1,175 × .03)]/(475 + 725)= 3.383%

Accepted Answer

The bank is performing more poorly than

Question 5

Investment securities plus ________ is equal to a bank's earning assets.

Accepted Answer

A) net loans and leases 
B) gross loans and leases 
C) property,plant,and equipment 
D) securities held for trading 
E) purchased accounts 
A) net loans and leases 
B) gross loans and leases 
C) property,plant,and equipment 
D) securities held for trading 
E) purchased accounts

Question 6

What are the major sources of purchased funds? Can using purchased funds change a bank's profitability? Its risk level? Explain.

Accepted Answer

The major sources of purchased funds are

Question 7

Oceanside Bank converts a dollar of equity into 10 cents of net income and has $9.50 in assets per dollar of equity capital. Oceanside also has a profit margin of 15 percent. What is Oceanside's AU ratio?

Accepted Answer

A) 1.05 percent 
B) 3.55 percent 
C) 5.56 percent 
D) 6.45 percent 
E) 7.02 percent 
A) 1.05 percent 
B) 3.55 percent 
C) 5.56 percent 
D) 6.45 percent 
E) 7.02 percent

Question 8

The largest market available for purchased funds is the ________.

Accepted Answer

A) wholesale CD market 
B) Eurodollar deposit market 
C) banker's acceptances market 
D) discount window purchases 
E) Fed funds market 
A) wholesale CD market 
B) Eurodollar deposit market 
C) banker's acceptances market 
D) discount window purchases 
E) Fed funds market

Question 9

What is the difference between net charge-offs (NCOs,sometimes called write-offs)and the provision for loan loss (PLL)? What is the purpose of the PLL account?

Accepted Answer

The PLL account is forward looking; it i

Question 10

The provision for loan loss account is actual loan losses less loan recoveries in a given time period.

Accepted Answer

A) True 
 B)False

Question 11

A bank has interest income to total assets ratio of 5.45 percent and has noninterest income of $45 million and total assets of $700 million. What is the bank's asset utilization ratio?

Accepted Answer

A) 5.45 percent 
B) 6.43 percent 
C) 9.67 percent 
D) 15.02 percent 
E) 11.88 percent 
A) 5.45 percent 
B) 6.43 percent 
C) 9.67 percent 
D) 15.02 percent 
E) 11.88 percent

Question 12

A wholesale bank is one that focuses its business activities on commercial banking relationships.

Accepted Answer

A) True 
 B)False

Question 13

Plains National Bank has interest income of $250 million and interest expense of $110 million,noninterest income of $40 million and noninterest expense of $65 million on earning assets of $3,900 million. What is Plains' overhead efficiency ratio?

Accepted Answer

A) 61.54 percent 
B) 44.00 percent 
C) 9.23 percent 
D) 42.45 percent 
E) 37.46 percent 
A) 61.54 percent 
B) 44.00 percent 
C) 9.23 percent 
D) 42.45 percent 
E) 37.46 percent

Question 14

Wholesale CDs obtained from an investment house rather than directly from a customer are referred to as brokered deposits.

Accepted Answer

A) True 
 B)False

Question 15

If the typical bank of this type has an overhead efficiency ratio of 0.65,then this particular bank ________ than the typical bank,ceteris paribus.

Accepted Answer

A) is doing a poorer job generating profitable off-balance-sheet activities 
B) is doing a better job time managing noninterest income and expenses 
C) is paying higher taxes 
D) has fewer loan losses 
E) None of these choices are correct. 
A) is doing a poorer job generating profitable off-balance-sheet activities 
B) is doing a better job time managing noninterest income and expenses 
C) is paying higher taxes 
D) has fewer loan losses 
E) None of these choices are correct.

Question 16

The largest source of income at a typical bank is

Accepted Answer

A) interest income on securities held for sale. 
B) interest income on securities held for investment. 
C) interest income on loans and leases. 
D) noninterest income. 
E) dividends or stock. 
A) interest income on securities held for sale. 
B) interest income on securities held for investment. 
C) interest income on loans and leases. 
D) noninterest income. 
E) dividends or stock.

Question 17

What are the differences between purchased funds and core deposits?

Accepted Answer

Purchased funds are very sensitive to th

Question 18

The allowance for loan and lease losses is bank management's estimate of the amount of gross loans and leases that will not be repaid to the bank.

Accepted Answer

A) True 
 B)False

Question 19

Core deposits typically include all except which one of the following?

Accepted Answer

A) Demand deposits 
B) NOW accounts 
C) MMDAs 
D) Eurodollar deposits 
E) Passbook savings accounts 
A) Demand deposits 
B) NOW accounts 
C) MMDAs 
D) Eurodollar deposits 
E) Passbook savings accounts

Exam 12: Commercial Banks Financial Statements and Analysis

The bank's ROA is

A municipal bond is paying a 6 percent annual yield. An equivalent risk corporate bond is paying 7 percent. Investors with a tax rate of ________ or higher would prefer the municipal bond.

MMDAs are a type of savings account that has some limited checking features. These accounts were designed to help banks compete with MMMFs.

Investment securities plus ________ is equal to a bank's earning assets.

What are the major sources of purchased funds? Can using purchased funds change a bank's profitability? Its risk level? Explain.

Oceanside Bank converts a dollar of equity into 10 cents of net income and has $9.50 in assets per dollar of equity capital. Oceanside also has a profit margin of 15 percent. What is Oceanside's AU ratio?

The largest market available for purchased funds is the ________.

What is the difference between net charge-offs (NCOs,sometimes called write-offs)and the provision for loan loss (PLL)? What is the purpose of the PLL account?

The provision for loan loss account is actual loan losses less loan recoveries in a given time period.

A bank has interest income to total assets ratio of 5.45 percent and has noninterest income of $45 million and total assets of $700 million. What is the bank's asset utilization ratio?

A wholesale bank is one that focuses its business activities on commercial banking relationships.

Plains National Bank has interest income of $250 million and interest expense of $110 million,noninterest income of $40 million and noninterest expense of $65 million on earning assets of $3,900 million. What is Plains' overhead efficiency ratio?

Wholesale CDs obtained from an investment house rather than directly from a customer are referred to as brokered deposits.

If the typical bank of this type has an overhead efficiency ratio of 0.65,then this particular bank ________ than the typical bank,ceteris paribus.

The largest source of income at a typical bank is

What are the differences between purchased funds and core deposits?

The allowance for loan and lease losses is bank management's estimate of the amount of gross loans and leases that will not be repaid to the bank.

Core deposits typically include all except which one of the following?

Introduction

Determinants of Interest Rates

Interest Rates and Security Valuation

The Federal Reserve System, monetary Policy, and Interest Rates

Money Markets

Bond Markets

Mortgage Markets

Stock Markets

Foreign Exchange Markets

Derivative Securities Markets

Commercial Banks: Industry Overview

Regulation of Commercial Banks

Other Lending Institutions: Savings Institutions, credit Unions, and Finance Companies

Insurance Companies

Securities Firms and Investment Banks

Investment Companies

Pension Funds

Types of Risks Incurred by Financial Institutions

Managing Credit Risk on the Balance Sheet

Managing Liquidity Risk on the Balance Sheet

Managing Interest Rate Risk and Insolvency Risk on the Balance Sheet

Managing Risk Off the Balance Sheet With Derivative Securities

Managing Risk Off the Balance Sheet With Loan Sales and Securitization

Filters