Question 1

In terms of profitability,a well-run bank usually has an ROA of

Accepted Answer

A) 0.5-3 percent. 
B) 3-5 percent. 
C) 5-10 percent. 
D) 10-15 percent. 
E) 15-20 percent. 
A) 0.5-3 percent. 
B) 3-5 percent. 
C) 5-10 percent. 
D) 10-15 percent. 
E) 15-20 percent. A

Question 2

Nontransaction deposits at banks include NOW accounts and demand deposits.

Accepted Answer

A) True 
 B)False  False

Question 3

A bank is earning 6 percent on its $150 million in earning assets and is paying 4.75 percent on its liabilities. The bank's interest rate spread is ________.

Accepted Answer

A) 6.00 percent 
B) 4.75 percent 
C) 1.25 percent 
D) 10.75 percent 
E) 1.26 percent 
A) 6.00 percent 
B) 4.75 percent 
C) 1.25 percent 
D) 10.75 percent 
E) 1.26 percent C

Question 4

Discuss the major differences between large banks and small banks. Which have had higher ROAs? Why?

Accepted Answer

Large banks tend to have 
-lower equity

Question 5

Most nonfinancial firms would never hold as much of their assets in safe liquid securities as banks do. Why do banks maintain such a high percentage of investment in securities?

Accepted Answer

To answer this we must look at the right

Question 6

An ILC is a type of

Accepted Answer

A) finance company. 
B) thrift institution. 
C) credit card bank. 
D) nonbank bank. 
E) foreign-owned loan corporation. 
A) finance company. 
B) thrift institution. 
C) credit card bank. 
D) nonbank bank. 
E) foreign-owned loan corporation.

Question 7

Banks have an average total debt ratio of about 90 percent.

Accepted Answer

A) True 
 B)False

Question 8

Negotiable certificates of deposit (CDs)do not have an active secondary market.

Accepted Answer

A) True 
 B)False

Question 9

Why are banks different from other depository institutions?

Accepted Answer

Banks are the main conduit of monetary p

Question 10

Nationally chartered banks receive chartering and merger approval from the

Accepted Answer

A) Federal Deposit Insurance Corporation. 
B) Office of Comptroller of the Currency. 
C) Federal Reserve System. 
D) Office of Thrift Supervision. 
E) All of these choices are correct. 
A) Federal Deposit Insurance Corporation. 
B) Office of Comptroller of the Currency. 
C) Federal Reserve System. 
D) Office of Thrift Supervision. 
E) All of these choices are correct.

Question 11

Financial institutions generally do not face liquidity risk.

Accepted Answer

A) True 
 B)False

Question 12

A bank has an interest rate spread of 150 basis points on $30 million in earning assets funded by interest-bearing liabilities. However,the interest rate on its assets is fixed and the interest rate on its liabilities is variable. If all interest rates go up 50 basis points,the bank's new pretax net interest income will be ________.

Accepted Answer

A) $600,000 
B) $450,000 
C) $300,000 
D) $250,000 
E) $175,000 
A) $600,000 
B) $450,000 
C) $300,000 
D) $250,000 
E) $175,000

Question 13

What are the major advantages a bank gains by expanding into international bank services? What are three disadvantages of international expansion?

Accepted Answer

Better diversification by expanding beyo

Question 14

In a bankruptcy situation,the Federal Reserve acts as the liquidator of the bank.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following could result in a negative NIM?

Accepted Answer

A) Growth in net interest income 
B) Lower non interest expense 
C) Decline in net interest income 
D) Higher non interest income 
E) Positive net interest spread 
A) Growth in net interest income 
B) Lower non interest expense 
C) Decline in net interest income 
D) Higher non interest income 
E) Positive net interest spread

Question 16

The ROA for financial institutions such as banks is typically quite low as compared to nonfinancial firms. Why? With such a low ROA,how can banks attract stockholders?

Accepted Answer

Microeconomics tells us that firms earn

Question 17

The largest single category of loans on the typical bank's balance sheet in 2016 was

Accepted Answer

A) U.S. government securities. 
B) commercial and industrial loans. 
C) consumer loans. 
D) real estate loans. 
E) interbank loans. 
A) U.S. government securities. 
B) commercial and industrial loans. 
C) consumer loans. 
D) real estate loans. 
E) interbank loans.

Question 18

Suppose you deposit $100 in a bank,which of the following will occur?

Accepted Answer

A) The bank's assets will increase by $100. 
B) The bank's liabilities will decrease by $100. 
C) The bank's liabilities will increase by $200. 
D) The bank's reserves will increase by $200. 
E) The bank's reserves will decrease by $100. 
A) The bank's assets will increase by $100. 
B) The bank's liabilities will decrease by $100. 
C) The bank's liabilities will increase by $200. 
D) The bank's reserves will increase by $200. 
E) The bank's reserves will decrease by $100.

Question 19

Which of the following is the primary regulator of bank holding company activities?

Accepted Answer

A) Federal Bank Holding Company Board 
B) FDIC 
C) Federal Reserve 
D) State regulatory agency in the chartering states 
E) U.S. Treasury 
A) Federal Bank Holding Company Board 
B) FDIC 
C) Federal Reserve 
D) State regulatory agency in the chartering states 
E) U.S. Treasury

Question 20

Equity capital at commercial banks in 2016 comprised about ________ of liabilities and equity.

Accepted Answer

A) 25 percent 
B) 21 percent 
C) 55 percent 
D) 11 percent 
E) 5 percent 
A) 25 percent 
B) 21 percent 
C) 55 percent 
D) 11 percent 
E) 5 percent

Exam 11: Commercial Banks: Industry Overview

In terms of profitability,a well-run bank usually has an ROA of

Nontransaction deposits at banks include NOW accounts and demand deposits.

A bank is earning 6 percent on its $150 million in earning assets and is paying 4.75 percent on its liabilities. The bank's interest rate spread is ________.

Discuss the major differences between large banks and small banks. Which have had higher ROAs? Why?

Most nonfinancial firms would never hold as much of their assets in safe liquid securities as banks do. Why do banks maintain such a high percentage of investment in securities?

An ILC is a type of

Banks have an average total debt ratio of about 90 percent.

Negotiable certificates of deposit (CDs)do not have an active secondary market.

Why are banks different from other depository institutions?

Nationally chartered banks receive chartering and merger approval from the

Financial institutions generally do not face liquidity risk.

What are the major advantages a bank gains by expanding into international bank services? What are three disadvantages of international expansion?

In a bankruptcy situation,the Federal Reserve acts as the liquidator of the bank.

Which of the following could result in a negative NIM?

The ROA for financial institutions such as banks is typically quite low as compared to nonfinancial firms. Why? With such a low ROA,how can banks attract stockholders?

The largest single category of loans on the typical bank's balance sheet in 2016 was

Suppose you deposit $100 in a bank,which of the following will occur?

Which of the following is the primary regulator of bank holding company activities?

Equity capital at commercial banks in 2016 comprised about ________ of liabilities and equity.

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 Financial Statements and Analysis

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