Liability management

1. What is ROE?

• 1. net profit after taxes/ assets

• 1. assets/ equity capital

• 1. net profit after taxes/ equity capital

• 1. interest on loans/ liability

 Which of the following are reported as liabilities on a bank’s balance sheet?

• reserves

• checkable deposits

• 1. loans

• 1. deposits with other banks

 How do banks manage their liabilities?

• Issue negotiable CDs.

• 1. Achieve an optimal mix of assets

• 1. Rarely borrow from other banks to meet their reserve needs.

• 1. Increasing total wealth over time by acquiring, maintaining, and trading investments that have the potential to grow in value.

Which type of deposits earns higher interest rate?

• Current account

• 1. Savings Account 

• Fixed Deposits

• 1. None of above

What is the measure of bank profitability?

• ROE

• ROA

• EM

• ROS

What are NOT Microsoft's liability management strategies?

• Manage security risk

• Timely Investments

• 1. Strategic Borrowing

• 1. High Liquidity

What is Liability management?

• Maintaining a balance between the maturities of assets and liabilities

• Hedges against changes in interest rates

• Reduces the likelihood of a mismatch between assets and liabilities

• All above are correct

Of the following, which would be the first choice for a bank facing a reserve deficiency?

• call in loans

• inject more equity (bank) capital

• sell securities.

• borrow from other banks

Because ________ are less liquid for the depositor than ________, they earn higher interest rates

• 1. money market deposit accounts; time deposits

• checkable deposits; passbook savings

• passbook savings; checkable deposits

• 1. none of the above

Liability management is the process of managing the ________

and cash flows to reduce the ________ from not paying a liability on time.

• 1. use of checkable deposits/ loan opportunities 

• use of assets/ loan oppotunities

• use of checkable deposits/ firm’s risk of loss

• use of assets/ firm’s risk of loss