IFE S4 Banking

Which of the following banking functions is NOT a Core Banking function?

• Making loans

• Providing a payment system

• Investing in financial instruments

• Taking deposits

Which of the following events lowers bank capital?

• The value of loans the bank has given to clients falls because of unexpected defaults.

• 1. The securities the bank holds double in value.

• 1. The clients of a bank withdraw half of their deposits.

• 1. The bank uses half of its excess reserves to issue new loans.

Which of the following statements is correct?

• 1. Through the function of lending money, banks help distributing funds efficiently.

• 1. Through the function of lending money banks always ensure a more equal distribution of wealth.

• 1. Lending money is always a gamble for banks and is only viable because in case the loans turn sour the government intervenes.

• 1. Banks will mostly look for short-term loans to minimise liquidity risk.

The return on assets (ROA) is calculated as:

• total assets / net income

• net income / total assets

• total equity / net income

• net income / total equity

Why can the return on equity be sometimes misleading?

• Because one could increase the return on equity by decreasing equity and replacing it with external funds.

• Because one cannot trust accountants in general.

• Because it can be artificially increased by just borrowing more money and use the extra cash as excess reserves.

• Because it can be artificially increased by raising more equity.

How can the net interest margin (NIM) formula be written?

• total interest income / total assets

• (total interest income - total interest expense) / total assets

• total assets / (total interest income - total interest expense)

• total interest expense / total assets

In which two categories can investment banking activities be split?

• Profitable activities and very profitable activities

• Household facing activities and company facing activities

• Profit making activities and loss making activities

• Corporate activities and market activities

In the context of investment banking, corporate restructuring implies that:

• The management is replaced.

• The production processes are changed, or new products are introduced to the production line.

• The suppliers are replaced, or new prime materials are used in the production process.

• Parts of the company are sold, or debt is restructured.

Which of the following activities is one of the major services that investment banks offer to governments?

• Mergers, acquisitions, and corporate restructuring

• Risk management

• Wealth and asset management

• Privatisation

Which of the following activities is a market activity that investment banks perform?

• Risk management

• Brokerage

• Advice on financing

• Mergers, acquisitions, and corporate restructuring