TOPIC 4 - TCNH - G5

 It is still possible to qualify for loans if you have a lot of debt or a poor credit score, but these will likely come with a higher interest rate.

• True

• False

Banks make profits through the process of asset trans-formation:

• They borrow long (accept long-term deposits) and lend short (make short-term loans)

• They borrow short (accept short-term deposits) and lend long (make long-term loans).

• They borrow short (accept short-term deposits) and lend short (make short-term loans).

• They borrow long (accept long-term deposits) and lend long (make long-term loans).

The bank loan process will include the following steps:

• Application - Evaluation - Approval and disbursement - Closure - Repayment

• Evaluation - Approval and disbursement - Repayment - Closure

• Application - Evaluation - Approval and disbursement - Repayment - Closure

• Application - Evaluation - Approval and disbursement - Repayment

Banks also create long-term relationships and gather information by issuing ____ to commercial customers. A ______ is a bank's commitment (for a specified future period of time) to provide a firm with loans up to a given amount at an interest rate that is tied to some market interest rate.

• 1. Loan guarantee

• 1. Loan commitment

• 2. Credit risk

Match the index with the right formula: 

1. 1. return on assets (ROA)

2. 2. return on equity (ROE)

3. 3. equity multiplier
   a. net profit after taxes/equity capital

4. b. net profit after taxes/assets

5. c. assets /equity capital

• 1-a, 2-b, 3-c

• 1-b, 2-a, 3-c

• 1-b, 2-c, 3-a

• 1-c, 2-a, 3-b

Which is the indispensable information to prove the bank that you have ability to pay the debt?

• 1. Income

• 1.  Credit score

• 2. Debt to Income ratio

• 1. All of above

When a bank take in a additional deposits, it gains an amount of reserves, when it pays out deposit, it loses an equal amount of reserves.

• True

• False

Which of the following are reported as assets on a bankʹs balance sheet?

• Borrowings

• Reserves

• Savings deposits

• Bank capital

Bank capital is equal to________minus________

• A.  total assets; total liabilities

• B. total liabilities; total assets

• C.  total assets; total reserves

• D. total liabilities; total borrowings

Bank capital is listed on the ___ side of the bankʹs balance sheet because it represents a____ of funds.

• A. liability; use

• B. liability; source

• C. asset; use

• D. asset; source