Question

37. If interest rates are projected for the next five years to be 5%,6%,7%,5% and 7% and the term premium on a 5 year bond is 1% then the interest rate on a 5 year bond is A. 6% B. 6.5% C.7% D. none of the previous CHAPTER 9: Banking & the management of financial institutions 38. A balance sheet indicates insolvency when A. Its capital exceeds its liabilities B. Its assets exceeds its liabilities C. Its liabilities exceeds its assets D. Its capital is less than its liabilities 39. Which of the following is an asset on a bank's balance sheet? A. Capital B. Checkable deposits C. Loans D. None of the previous 40. The share of checkable deposits as a percentage of a bank's liabilities has? A. Expanded moderately over time B. Expanded dramatically over time C. Remain unchanged over time D. Shrunk over time 41. When anyone like myself withdraws $100 from a bank the bank's assets--- and its liabilities... A. Increase; increase B. Increase; decrease C. Decrease; increase D. Decrease; decrease 42. If a bank has a ROE retum on equity) of 10% and its ROA Return on assets) is 1% then its equity multiplier is A. 1/10 B. 100 C. 10 D.I 43. An example of off balance sheet activities is A Loans B. Certificates of deposit C. Fee income D. Bond holdings 44. If a bank has rate sensitive assets of S50 million and rate sensitive liabilities of $40 million, than an interest rate increase of 5 percentage points would cause net worth to(GAP Analysis) A. Increase $500 thousand B. Decrease by S500 thousand C Increase by S10 million D. All the previous answers are wrong Chapter 10- Economic Analysis of Financial Regulation 45. The major way that the FDIC handles failed banks is called the A. Payback ASAP method B. Purchase & Assumption method C. The Payoff method D. The Safety Net Approach

Answer 1

37. (A) 6%

It would be Average rate of last 5 year ie.(5+6+7+5+7)/5 =6%

38. (C). Its liability exceeds it's Assets.

It happens when company/firm have too much liability than assets, even after selling entire Asset could not pay full liability.

39. (C). Loans..

Loan is Asset for lender ie. Bank, and it is liability for borrower.

40. (B). Expanded dramatically over time.

As rapidly, growing economy and business people don't wish to carry cash, especially businessman, wish to have demand deposit account ie. Checkable deposit. So simultaneously checkable deposit also expanded dramatically over time, same as expansion in trend of business.