FINMAN 24 SEMI-FINAL EXAMINATION

Name

A local bank notices that it is earning significantly less interest than expected. Upon review, the bank realizes that it has kept its loan interest rates low while deposit rates remain high. What should the bank do to improve its profitability under the interest rate spread strategy?

• A) Increase deposit interest rates further
• B) Reduce loan interest rates
• C) Increase loan interest rates and reduce deposit interest rates
• D) Offer fee-based services instead

A bank specializing in home loans is considering offering adjustable-rate mortgages (ARMs) instead of fixed-rate mortgages to optimize its profit strategy. What is the primary advantage of ARMs for the bank?

• A) They provide more stable revenue
• B) They transfer interest rate risk to borrowers
• C) They eliminate credit risk
• D) They attract more high-risk borrowers

A commercial bank wants to diversify its revenue sources. It starts charging customers for ATM withdrawals, wire transfers, and overdrafts. Which profit strategy is the bank using?

• A) Interest rate spread strategy
• B) Fee-based income strategy
• C) Cost leadership strategy
• D) Customer relationship management strategy

A new online bank is struggling to generate profits through interest margins. Which of the following strategies would best help them increase revenue without relying on interest?

• A) Offering free transactions
• B) Charging for premium banking services and advisory fees
• C) Lowering deposit interest rates further
• D) Reducing transaction fees to attract customers

A mid-sized bank that previously focused only on deposit accounts and loans decides to offer insurance, mutual funds, and wealth management services. Which strategy is the bank implementing?

• A) Interest rate spread strategy
• B) Fee-based income strategy
• C) Diversification strategy
• D) Cost leadership strategy

A financial institution expands its product offerings by launching a mobile wallet, investment advisory, and credit scoring services. What is the main risk of this strategy?

• A) Regulatory compliance challenges
• B) Increased credit risk exposure
• C) Higher reliance on deposit interest rates
• D) Reduced customer satisfaction

A bank reduces its number of physical branches and increases online banking services to cut operational costs. Which strategy is it following?

• A) Interest rate spread strategy
• B) Diversification strategy
• C) Cost leadership strategy
• D) International expansion strategy

Which of the following would NOT be a cost-cutting measure under the cost leadership strategy?

• A) Investing in AI-powered customer service
• B) Implementing paperless banking
• C) Hiring more employees for in-person services
• D) Automating back-office operations

A retail bank introduces a loyalty program where customers earn points for every transaction, redeemable for lower loan interest rates. Which strategy does this represent?

• A) Customer relationship management strategy
• B) Interest rate spread strategy
• C) Digital banking strategy
• D) Mergers and acquisitions strategy