Unit 3 - TCNH

All else the same, if a bank has more rate-sensitive liabilities than assets, then a(n) ___ in interest rates will ___ bank profits.

• increase; increase

• increase; reduce

• decline; reduce

• decline; not affect

Which of the following are primary concerns of the bank manager?

• maintaining sufficient reserves to minimize the cost to the bank of deposit outflows

• extending loans to borrowers who will pay high interest rates, but who are also good credit risks

• acquiring funds at a relatively low cost, so that profitable lending opportunities can be realized

• all of the above

Duration analysis involves comparing the average duration of the bank's ___ to the average duration of its ___.

• securities portfolio; non-deposit liabilities

• loan portfolio; non-deposit liabilities

• loan portfolio; deposit liabilities

• assets; liabilities

Examples of off-balance-sheet activities include

• loan sales.

• foreign exchange market transactions.

• trading in financial futures.

• all of the above.

Which of the following statements are true?

• A bank's assets are its sources of funds.

• A bank's liabilities are its uses of funds.

• A bank's balance sheet shows that total assets equal total liabilities plus equity capital.

• all of the above.

Which of the following statements is true?

• A bank's assets are its uses of funds.

• A bank's assets are its sources of funds.

• A bank's liabilities are its uses of funds.

• Only (B) and (C) of the above are true.

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

• Reserves

• Checkable deposits

• Loans

• Deposits with other banks

The most important category of assets on a bank’s balance sheet is

• discount loans.

• securities.

• loans.

• cash items in the process of collection.

Banks earn profits by selling ___ with attractive combinations of liquidity, risk, and return, and using the proceeds to buy ___ with a different set of characteristics.

• loans; deposits

• securities; deposits

• liabilities; assets

• assets; liabilities.

In general, banks make profits by selling ___ liabilities and buying ___ assets.

• long-term; shorter-term

• short-term; longer-term

• illiquid; liquid

• risky; risk-free.