商业银行管理彼得S.罗斯英文原书第8版-英语试题库Chap006

实用文档

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Rose/Hudgins,BankManagementandFinancialServices,8/e

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TestBank,Chapter6

Chapter6.

MeasuringandEvaluatingthePerformanceofBanksandTheirPrincipalCompetitors.

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FillintheBlankQuestions.

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1. Theequitymultiplierforabankmeasurestheamountof_____________________ofthebankandisonepartoftheevaluationofthebank'sROE..

Answer:leverage(debt).

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2. __________________________istheriskthathastodowiththequalityofthebank'sassetsand,inparticular,thebank'sloans..

Answer:Creditrisk.

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3. Solvency(orcapital)riskforabankcanbemeasuredby__________________________.Listonewaysolvencyriskcanbemeasured..

Answer:PurchasedFunds/TotalLiabilities(Thereareseveralotherratiosthatcananswerthisquestionaswell).

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4. __________________________aretheassetsofafinancialinstitutionthatwillmatureorberepricedwithinasetperiodoftime..

Answer:InterestSensitiveAssets.

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5. __________________________istheriskthatthevalueofthefinancialinstitution'sassetportfolio(particularlygovernmentorothermarketablesecurities)willdeclineinvalue..

Answer:Marketrisk.

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6. Eurodollars,FedFunds,RepurchaseAgreements,andlargeCDstogetherareknowas_____________________..

Answer:PurchasedFunds.

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7. __________________________istheriskthatthefinancialinstitutionmaynotbeabletomeettheneedsofdepositorsforcash..

Answer:Liquidityrisk.

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8. __________________________areloanswhicharepastdueby90daysormore..

Answer:Nonperformingloans.

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9. __________________________reflectsthebank'sportfoliomanagementpoliciesandthemixandyieldonthebank'ssecuritiesandisonepartoftheevaluationofROE..

Answer:Assetutilization.

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10. __________________________reflectstheeffectivenessoftheexpensemanagementofthebankandisonepartoftheevaluationofROE..

Answer:Netprofitmargin.

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11. __________________________measuresthereturntostockholdersontheirinvestmentinthebank.Itistheproductofnetprofitmargin,assetutilizationandtheequitymultiplier..

Answer:ROE.

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12. __________________________measurestheamountofdebtorleverageabankhasandisonepartoftheevaluationofthebank'sROE)Itisgenerallyanumberlargerthanone..

Answer:Equitymultiplier.

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13. The__________________________isastandardizedreportprovidedbyfederalregulatorswhichreportsthebalancesheet,incomestatementandotherdataforallfederallysupervisedbanks.Ithasthisyear'sdataaswellasthreepreviousyearsandalsocontainsinformationonpeerinstitutions..

Answer:UniformBankPerformanceReport.

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14. __________________________measuresthebank'sriskoflongrunsurvival.Itmeasuresthebank'scapitalpositionandshowsiftherehasbeenanyerosionofcapitalovertime..

Answer:Solvencyrisk(orcapitalrisk).

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15. __________________________istheriskthatshiftinginterestratesinthemarketwilladverselyaffectafinancialinstitution'snetincomeorthevalueofitsassetsorequity..

Answer:Interestraterisk.

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16. The____________________Actrestrictscombinedauditingandconsultingrelationshipsinordertopromoteauditorindependenceandobjectivity..

Answer:Sarbanes-Oxley.

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isoneofthemostwidelyrespectedprivateinstitutionsthatratesthecreditqualityoffinancialinstitutions..

Answer:Thomson’sBankWatch,Inc..

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referstotheuncertaintyregardingthefinancialfirm’searningsduetofailuresincomputersystems,errors,misconductbyemployees,lighteningstrikesandsimilarevents..

Answer:Operational(transactional)risk.

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referstovariabilityinearningsresultingfromactionstakenbythelegalsystemincludingunenforceablecontracts,lawsuitsandadversejudgements..

Answer:Legalrisk.

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includesviolationsofrulesandregulations.Itcanincludefailuretoholdadequatecapitalwhichcanleadtocostlycorrectiveactions..

Answer:Compliancerisk.

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istheuncertaintyassociatedwithpublicopinion.Negativepublicity(whethertrueornot)canaffectafinancialfirm’searningsbydissuadingcustomersfromusingtheservicesoftheinstitution..

Answer:Reputationrisk.

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Asdataprocessingoffinancialinformationbecomesmoreimportant,managersoffinancialfirmscanrealizecostsavingsfrom,transferringtasksfrominsidetofirmitselftootherfirmsspecializingininformationtechnology..

Answer:outsourcing.

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Atraditionalmeasureofearningsefficiencyistheortotalinterestincomeovertotalearningsassetslesstotalinterestexpensesovertotalinterestbearingbankliabilities.Itmeasurestheeffectivenessofafirm’sintermediationfunctionintheborrowingandlendingofmoney..

Answer:earningsspread.

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OnepartofROEisornetincomeoverpre-taxnetoperatingincomewhichmeasuresthefinancialfirm’suseofsecuritygainsandlossesandothertaxmanagementtoolstominimizetaxexposure..

Answer:taxmanagementefficiency.

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Netprofitmargincanbesplitintotwoparts,andtaxmanagementefficiency.Thefirstpartispre-taxnetoperatingincomeovertotaloperatingrevenuewhichlooksathowmanydollarsofrevenuesurviveafteroperatingexpensesareremoved..

Answer:expensecontrolefficiency.

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True/FalseQuestions.

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T F 26. Financialinstitutionsthatpursuethe"quietlife"asagoalarereallypursuingriskminimization..

Answer:True.

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T F 27. Attemptingtomaximizeabank'sstockvalueisthekeyobjectiveforbankswhichshouldhavepriorityoverallotherbankgoals..

Answer:True.

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T F 28. Iftheexpectedstreamoffuturebankshareholderdividendsrises,abank'sstockpriceshouldalsorise,otherfactorsheldconstant..

Answer:True.

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T F 29. Ifthediscountfactorassociatedwiththevalueofabank'sstockrises,thebank'sstockpriceshouldrise,otherfactorsheldconstant..

Answer:False.

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T F 30. Abank'sROAequalsitsROEtimestheratiooftotalassetsdividedbytotalequitycapital..

Answer:False.

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T F 31. Accordingtothetextbookabank'sasset-utilizationratioreflectsthemixandyieldonthebank'sportfolioofassets..

Answer:True.

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T F 32. Thebank'sprofitmarginorratioofnetafter-taxincometototaloperatingrevenueisameasureoffinancialleverageforabank..

Answer:False.

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T F 33. Theratioofabank'snetafter-taxincometopre-taxnetoperatingincomeisdescribedinthetextasameasureoftaxmanagementefficiency..

Answer:True.

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T F 34. Inthetextbooktheratioofpretaxnetoperatingincometototaloperatingrevenuesisdescribedasameasureoftheeffectivenessofafinancialinstitution’sexpense-controlefficiency..

Answer:True.

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T F 35. Theratioofnon-performingassetstototalloansandleasesisameasureofcreditriskinbanking..

Answer:True.

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T F 36. Themeasureofabank'sefficiencyandreturnknownasthe"earningsspread"subtractstotalinterestexpensesfromallthebank'sinterestincomeandthesetwoitemsarethendividedbytotalassets..

Answer:False.

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T F 37. InrecentyearstheU.S.bankingindustry'sequitymultiplierhasgenerallyriseninresponsetoregulatorypressuretoraisemorecapital..

Answer:False.

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T F 38. Ifabankaddsmorefull-timeemployeesandpoststhesamenetoperatingincome,itsemployeeproductivityratio,asdefinedinthetext,mustfall..

Answer:True.

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T F 39. ThemostprofitableU.S.banksintermsofbothROAandROEaremedium-sizeinstitutionsintheassetsizerangeof$100millionto$10billion,accordingtothetextbook..

Answer:True.

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T F 40. ROAmeasureshowcapablythemanagementofafinancialinstitutionhasbeenconvertingtheinstitution'sassetsintonetearnings..

Answer:True.

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T F 41. Thenoninterestmarginisgenerallypositiveformostbanks..

Answer:False.

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T F 42. Theratioofnonperformingassetstototalloansandleasesisconsideredtobeameasureofabank'smarketrisk..

Answer:False.

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T F 43. Charge-offsrepresentsecuritiesabankdecidestosellbecausetheyhavedeclinedinvalue..

Answer:False.

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T F 44. Loanspastduefor90daysormoreareclassifiedasnonperformingassets..

Answer:True.

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T F 45. Theratioofcashandgovernmentsecuritiestototalassetsisconsideredtobeameasureofliquidityriskinbanking..

Answer:True.

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T F 46. Theratioofuninsureddepositstototaldepositsisconsideredtobeameasureofcreditriskinbanking..

Answer:False.

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T F 47. Theinterestratespreadbetweenmarketyieldsonbankdebtissues(suchascapitalnotesandCDs)andthemarketyieldsongovernmentsecuritiesofthesamematurityisconsideredtobeameasureofmarketriskinbanking..

Answer:False.

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T F 48. Theratioofabank'snetoperatingincometothenumberofabank'sfull-time-equivalentemployeesiscalledtheemployeeproductivityratio..

Answer:True.

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T F 49. Smallerbanksusuallyhavefewerliquidassetsthanlargerbanks..

Answer:False.

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T F 50. Thebank'sassetutilizationratioreflectstheeffectivenessofthebank'sexpensemanagement..

Answer:False.

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T F 51. TheFDICisaprivatecreditratingcompanywhichprovidescreditratingsontheshorttermandlongtermsecuritiesissuedbybanks..

Answer:False.

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T F 52. Duringthe1980'stheComptrolleroftheCurrency,theFederalReserveandtheFDICcreatedanewtooltohelpthemanalyzethefinancialconditionofbanks.ThisnewtooliscalledtheUniformBankPerformanceReport..

Answer:True.

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T F 53. Liquidityriskforabankexaminesthequalityofthebank'sassetsand,inparticular,thequalityofthebank'sloans..

Answer:False.

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T F 54. Thebank'sdegreeofassetutilization(AU)orratiooftotaloperatingrevenuetototalassetsisameasureofassetmanagementefficiency,especiallyintermsofthemixandyieldonassets..

Answer:True.

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T F 55. AccordingthecasestudyofthefailureofSuperiorBankofChicagoandtheFDIC’stakeoverofthisinstitutionin2001,themainproblemwasattributedtomisleadingaccountingpracticesofinflatingassetvaluesandrevenuesdeflatingliabilitiesandexpenses.TheSarbanes-OxleyAccountingStandardsActof2002addressesthisissueandexpresslyencouragescombiningauditingandconsultingrelationshipsinordertopromoteefficiencyandprofitabilityoffinancialinstitutions..

Answer:False.

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MultipleChoiceQuestions.

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Theratioofabank'sinterestincomefromitsloansandsecurityinvestmentslessinterestexpensesondebtissueddividedbytotalearningassetsmeasuresabank's:.

A) Netoperatingmargin.

B) Netreturnbeforespecialtransactions.

C) Netinterestmargin.

D) Returnonassets.

E) Noneoftheabove.

Answer:C.

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ROEforabankiscalculatedby:.

A) Dividingnetafter-taxincomebytotalequitycapital..

B) Dividingtotaloperatingrevenuelessoperatingexpensesbytotalassets..

C) Deductingtotalinterestexpensesfromtotalinterestincomeanddividingbytotalequitycapital..

D) Noninterestincomelessnoninterestexpensesdividedbytotalearningassets..

E) Noneoftheabove..

Answer:A.

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Thedifferencebetweensuchsourcesofbankincomeasservicechargesondepositsandtrust-servicefeesandsuchsourcesofbankexpensesassalariesandwagesandoverheadexpensesdividedbytotalassetsortotalearningassetsiscalledthe:.

A) Netprofitmargin.

B) Netoperatingmargin.

C) Netnoninterestmargin.

D) Netreturnonassets.

E) Noneoftheabove.

Answer:C.

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Abank'sROEequalsitsROAtimesits:.

A) Netprofitmargin.

B) Totalassetsdividedbytotalequitycapital.

C) Totaloperatingrevenuesdividedbytotalassets.

D) Ratioofnetafter-taxincometototaloperatingrevenues.

E) Noneoftheabove..

Answer:B.

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Theearningsspreadforabankisequalto:.

A) Totalinterestincomedividedbytotalearningassetslesstotalinterest-expensedividedbytotalinterest-bearingbankliabilities..

B) Totalinterestincomelesstotalinterestexpensesdividedbyearningassets..

C) Totaloperatingrevenueslesstotaloperatingexpensesdividedbytotalassets..

D) Totalcashandnoncashexpensessubtractedfrominterestandnoninterestincomedividedbytotalassets..

E) Noneoftheabove..

Answer:A.

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Theso-calledemployeeproductivityratioforabankisequalto:.

A) Netoperatingrevenuelesstotalinterestexpensesperemployee..

B) Totalinterestandnoninterestexpenseperemployee.

C) Netoperatingincomeperfull-time-equivalentemployee.

D) Totaloperatingearningslesssalariesandwagesexpenseperemployee..

E) Noneoftheabove..

Answer:C.

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AccordingtothetextbookthemostprofitablebanksintheUnitedStatesin2007fellintheassetsizerangeof:.

A) Under$25millionintotalassets.

B) Under$100millionintotalassets.

C) Between$100millionand$10billionintotalassets.

D) Over$10billionintotalassets.

E) Noneoftheabove..

Answer:D.

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Abank'sstockpricewilltendtoriseifthe:.

A) Valueofthestreamoffuturestockholderdividendsisexpectedtoincrease.

B) Thebankingorganization'sperceivedlevelofriskhasfallen.

C) Expecteddividendsincrease,whileperceivedlevelofriskdeclines.

D) Alloftheabove..

E) Noneoftheabove..

Answer:D.

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Theratiothatequalstotalinterestincomedividedbytotalearningassetslesstotalinterestexpensedividedbytotalinterest-bearingliabilitiesisknownasthe:.

A) Earningsbase.

B) Earningsspread.

C) Netincomemargin.

D) Netreturnpriortospecialtransactions.

E) Noneoftheabove.

Answer:B.

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Whatdoloansandsecurityinvestmentsrepresentforabank?.

A) Earningassets.

B) Classifiedassets.

C) Discretionaryaccounts.

D) Market-valuedassets.

E) Noneoftheabove.

Answer:A.

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Theso-calledtax-managementefficiencyratioconsistsof:.

A) Totaltaxliabilitiesovernetincome.

B) Tax-exemptassetsovertaxableassets.

C) Netincomeoverpre-taxnetoperatingincome.

D) Taxesowedovertotalliabilitiesofabank.

E) Noneoftheabove..

Answer:C.

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Theratioofnetloanstototalassetsisconsideredtobeameasureofwhatformofriskinbanking?.

A) Creditrisk.

B) Liquidityrisk.

C) Marketrisk.

D) Interest-raterisk.

E) Noneoftheabove.

Answer:B.

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OEforabankreflects:.

A) Howwelltheassetsofthebankaremanaged.

B) Thebank'suseofleverage.

C) Howwellthebankcontrolsexpenses.

D) Alloftheabove.

E) Noneoftheabove.

Answer:D.

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Aratiothatcanbeusedtomeasureabank'screditriskwouldbe:.

A) Netloans/totalassets.

B) Interestsensitiveassets/interestsensitiveliabilities.

C) Totalassets/numberoffulltimeemployees.

D) Nonperformingloans/totalloans.

Answer:D.

Abankthathasalowprofitmarginmostlikely:.

A) Isdoingapoorjobofcontrollingexpenses.

B) Hasasmallamountoffinancialleverage.

C) Hasasmallamountofliquidityrisk.

D) Hasassetsthatarenotveryproductive.

E) Noneoftheabove.

Answer:A.

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Abankthathasahighassetutilization(AU)ratiomostlikely:.

A) Isdoingapoorjobofcontrollingexpenses.

B) Hasasmallamountoffinancialleverage.

C) Hasasmallamountofliquidityrisk.

D) Isallocatingassetstothemostproductiveinvestments.

E) Noneoftheabove.

Answer:D.

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Whichofthefollowingwouldbethebestexampleofaratiousedtoexaminethecostofoneofthebank'sliabilities?.

A) Demanddeposits/totalassets.

B) Interestontimedeposits/totaltimedeposits.

C) Interestonrealestateloans/totalrealestateloans.

D) Interestsensitiveassets/interestsensitiveliabilities.

Answer:B.

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Whichofthefollowingwouldbethebestexampleofaratiousedtoexaminethereturnofoneofthebank'sassets?.

A) Demanddeposits/totalassets.

B) Interestontimedeposits/totaltimedeposits.

C) Interestonrealestateloans/totalrealestateloans.

D) Interestsensitiveassets/interestsensitiveliabilities.

Answer:C.

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Whichofthefollowingwouldbethebestexampleofaratiousedtoexaminethebank'sinterestraterisk?.

A) Demanddeposits/totalassets.

B) Interestontimedeposits/totaltimedeposits.

C) Interestonrealestateloans/totalrealestateloans.

D) Interestsensitiveassets/interestsensitiveliabilities.

Answer:D.

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Abankexpectstopayadividendnextyearof$3.45andalsoexpectsdividendstogrowatarateof7%fromnowon.Iftheappropriatediscountrateis15%,whatshouldthisbank'sstockpricebeinthemarket?.

A) $23.00.

B) $43.13.

C) $46.14.

D) $49.29.

E) $24.61.

Answer:B.

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UsingtheinformationlistedbelowforCarterStateBank,whatisthisbank'sROE?.

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Netincome

$55million

Totaloperatingrevenue

$650million

Totalassets

$4,055million

Totalequitycapital

$350million

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A) 8.46percent.

B) 16.03percent.

C) 15.71percent.

D) 1.36percent.

E) Noneoftheabove.

Answer:C.

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UsingtheinformationlistedbelowforCarterStateBank,whatisthisbank'sROA?.

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Netincome

$55million

Totaloperatingrevenue

$650million

Totalassets

$4,055million

Totalequitycapital

$350million

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A) 8.46percent.

B) 16.03percent.

C) 15.71percent.

D) 1.36percent.

E) Noneoftheabove.

Answer:D.

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UsingtheinformationlistedbelowforCarterStateBank,whatisthisbank'snetprofitmargin?.

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Netincome

$55million

Totaloperatingrevenue

$650million

Totalassets

$4,055million

Totalequitycapital

$350million

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A) 8.46percent.

B) 16.03percent.

C) 15.71percent.

D) 1.36percent.

E) Noneoftheabove.

Answer:A.

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UsingtheinformationlistedbelowforCarterStateBank,whatisthisbank'sassetutilizationratio?.

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Netincome

$55million

Totaloperatingrevenue

$650million

Totalassets

$4,055million

TotalequityCapital

$350million

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A) 8.46percent.

B) 16.03percent.

C) 15.71percent.

D) 1.36percent.

E) Noneoftheabove.

Answer:B.

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TheTRCBankhasanetprofitmarginof7.5%,anassetutilizationratioof18%,anequitymultiplierof20times.Whatisthisbank'sROA?.

A) 27.00percent.

B) 1.35percent.

C) 7.50percent.

D) 1.50percent.

E) 3.6percent.

Answer:B.

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TheTRCBankhasanetprofitmarginof7.5%,anassetutilizationratioof18%,anequitymultiplierof20times.Whatisthisbank'sROE?.

A) 27.00percent.

B) 1.35percent.

C) 7.50percent.

D) 1.50percent.

E) 3.6percent.

Answer:A.

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TheSmith-JamesBankhasanROEof17.5%,anassetutilizationratioof13%andanetprofitmarginof9%.Whatisthisbank'sROA?.

A) 14.96percent.

B) 1.58percent.

C) 1.17percent.

D) 134.62percent.

E) Noneoftheabove.

Answer:C.

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TheSmith-JamesBankhasanROEof17.5%,anassetutilizationratioof13%andanetprofitmarginof9%.Whatmustthisbank'sequitymultiplierbe?.

A) 14.96times.

B) 1.58times.

C) 1.17times.

D) 134.62times.

E) Noneoftheabove.

Answer:A.

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Whatistheequitymultiplierforabankwhereequityisequalto10percentoftotalassets?.

A) 90.0.

B) 10.0.

C) 1.1.

D) 110.0.

E) 1.0.

Answer:.

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Whichofthefollowingratioswouldbeameasureofcreditrisk?.

A) NonperformingLoans/NetLoans.

B) NetLoans/TotalAssets.

C) InterestSensitiveAssets/InterestSensitiveLiabilities.

D) EquityCapital/TotalAssets.

E) Noneoftheabove.

Answer:A.

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Whichofthefollowingratioswouldbeameasureofmarketrisk?.

A) NonperformingLoans/NetLoans.

B) NetLoans/TotalAssets.

C) InterestSensitiveAssets/InterestSensitiveLiabilities.

D) EquityCapital/TotalAssets.

E) Noneoftheabove.

Answer:E.

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Inrecentyearsbankshavebeen__________profitablethan(as)S&LsandSavingsBanks..

A) More.

B) Less.

C) As.

D) Muchmore.

E) Muchless.

Answer:A.

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Operationalriskincludeswhichofthefollowing?.

A)Failureofbank’scomputersystem.

B)Closureofabankforthreemonthsduetofloodingfromamajorhurricane.

C)Embezzlementoffundsofabankbyatellerofthebank.

D)Closureofabankfortwoweeksduetoafirefromalighteningstrike.

E)Alloftheaboveareexampleofoperationalrisk.

Answer:E.

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BrianSmith,CEOofCarterNationalBank,decidesthatinterestratesaregoingtofallinthefutureandasaresultbuys$100millionin30yearTreasuryBondsforthebank’ssecurityportfolio.Instead,interestratesrisecausingthevalueofthesebondstofall.Thiswouldbeanexampleofwhichofthefollowingtypesofrisk?.

A)Operationalrisk.

B)Legalrisk.

C)Compliancerisk.

D)Strategicrisk.

E)Reputationrisk.

Answer:D.

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ChaosStateBankhasanoldcomputersystemwhichcangodownforweeksatatime,leavingcustomersunabletoaccesstheiraccountsonline.Manycustomershaveleftthebankforbankswithmorereliablecomputersystems.Whichtypeofriskwouldthisbeanexampleof?.

A)Operationalrisk.

B)Legalrisk.

C)Compliancerisk.

D)Strategicrisk.

E)Reputationrisk.

Answer:A.

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CarsonCountyStateBankhasaratioofequitycapitaltototalassetsof2.5%.TheFDICwhichregulatesthisbankhasdeterminedthatthisisnotenoughequitycapitalandismakingthebankissuenewstockinthemarket.Inaddition,theyarenotallowingthebanktoissueadividendtotheircurrentstockholders.Whichtypeofriskwouldthisbeanexampleof?.

A)Operationalrisk.

B)Legalrisk.

C)Compliancerisk.

D)Strategicrisk.

E)Reputationrisk.

Answer:C.

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EverettBankhasjustlearnedthatthereisadisgruntledformeremployeewhohascreatedablogthatistellingeveryonethatEverettBankhashalvedtheircustomerservicerepresentativesandsocustomershavegreatdifficultygettingthroughtoalivepersonwhenthereisaproblemwiththeiraccount.Everettisworriedthattheymaylosecustomersasaresult.Whichtypeofriskwouldthisbeanexampleof?.

A)Operationalrisk.

B)Legalrisk.

C)Compliancerisk.

D)Strategicrisk.

E)Reputationrisk.

Answer:E.

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NormanBankmadealoanof$1,000,000toJarodLeFevre.JarodhasdeclaredbankruptcyandNormanBankhasjustlearnedthatthejudgeinthecasehasruledthatJaroddoesnothavetopayanyoftheloanbackorforfeitanyofhisassets.Whichtypeofriskwouldthisbeanexampleof?.

A)Operationalrisk.

B)Legalrisk.

C)Compliancerisk.

D)Strategicrisk.

E)Reputationrisk.

Answer:B.

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ForrestFennellisthinkingaboutinvestinginCapitalCityBank.Heisexaminingcertainratiosofthebankincludingtheratioofnonperformingloanstototalloansandleasesandtheprovisionforloanlossestototalloansandleases.WhattypeofriskisForrestattemptingtomeasurewiththeseratios?.

A)Creditrisk.

B)Liquidityrisk.

C)Marketrisk.

D)Interestraterisk.

E)Operationalrisk.

Answer:A.

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GeraldWilkensisthinkingaboutinvestinginTallahasseeStateBank.Heisexaminingcertainratiosofthebankincludingtheratioofcashassetsandgovernmentsecuritiestototalassetsandpurchasedfundstototalassets.WhattypeofriskisGeraldattemptingtomeasurewiththeseratios?.

A)Creditrisk.

B)Liquidityrisk.

C)Marketrisk.

D)Interestraterisk.

E)Operationalrisk.

Answer:B.

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AmyFarmeristhinkingaboutinvestingintheGuthrieNationalBank.Sheisexaminingcertainratiosofthebankincludingtheratioofthebookvalueoftheassetstothemarketvalueoftheassetsandthemarketvalueofthebondsheldbythebanktotheirrecordedvalue.WhattypeofriskisAmyattemptingtomeasurewiththeseratios?.

A)Creditrisk.

B)Liquidityrisk.

C)Marketrisk.

D)Interestraterisk.

E)Operationalrisk.

Answer:C.

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PaulSmithisthinkingaboutinvestinginCapitalCityBank.Heisexaminingcertainratiosofthebankincludingtheratioofinterestsensitiveassetstointerestsensitiveliabilitiesanduninsureddepositstototaldeposits.WhattypeofriskisPaulattemptingtomeasurewiththeseratios?.

A)Creditrisk.

B)Liquidityrisk.

C)Marketrisk.

D)Interestraterisk.

E)Operationalrisk.

Answer:D.

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TheGaricStateBankofNewOrleanswasunderwaterforthreeweeksafterHurricaneKatrinahitthestate.Thelobbyisfullofmudandotherdebris.Manyofthevaluablesstoredinthebank’ssafetydepositboxeshavebeenruined.JohnGaric,thePresidentandCEOofthebank,hasbeenworkingnightanddaytoreopenthebank.WhattypeofriskhasJohnbeendealingwith?.

A)Creditrisk.

B)Liquidityrisk.

C)Marketrisk.

D)Interestraterisk.

E)Operationalrisk.

Answer:E.

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CastleStateBankhasthefollowingfinancialinformation..

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BalanceSheet

IncomeStatement

Cash

$100

InterestIncome

$400

SecuritiesInvestments

$600

InterestExpenses

($150)

NetLoans

$1200

Non-InterestIncome

$50

NetPremisesandEquip.

$300

Non-InterestExpenses

($100)

TotalAssets

$2200

ProvisionforLoanLosses

($60)

Deposits

$1100

PreTaxNetOperatingIncome

$140

Non-DepositBorrowings*

$800

SecuritiesGains(Losses)

($40)

EquityCapital

$300

Taxes

($45)

TotalLiabilitiesandEquity

$2200

NetIncome

$55

*AllPurchasedFunds

.

UsethisinformationtocalculateCastleStateBank’sROE.

A)20.45%.

B)18.33%.

C)12.22%.

D)7.33%.

E)2.5%.

Answer:B.

.

.

CastleStateBankhasthefollowingfinancialinformation..

.

BalanceSheet

IncomeStatement

Cash

$100

InterestIncome

$400

SecuritiesInvestments

$600

InterestExpenses

($150)

NetLoans

$1200

Non-InterestIncome

$50

NetPremisesandEquip.

$300

Non-InterestExpenses

($100)

TotalAssets

$2200

ProvisionforLoanLosses

($60)

Depo