Find total original asset value

Reference no: EM131095668

Handout 5-

[Q1] If a bank has ________ rate-sensitive assets than liabilities, then ________ in interest rates will increase bank profits.

A) more; a decline

B) more; an increase

C) less; an increase

D) fewer; a surge

[Q2] Mortgage Crisis occurred because of lending large amounts of money to ________ risk borrowers with ________ FICO scores, given ________ biased value appraisals.

A) High, high, upward,

B) Low, high, downward

C) High, low, downward

D) High, low, upward

[Q3] The maturity of a bond is always _______ than the duration of the bond. When the maturity of the bond is zero it automatically implies that the duration is _______

A) smaller or equal, smaller or zero

B) bigger, smaller

C) smaller, bigger

D) higher or equal, zero

[Q4] In the interest rate swap contracts, the bank who receives the ____________ wins over the bank who receives the ____________ when the interest rate ______________

A) Variable, fixed, decreases

B) Variable, fixed, increases

C) Fixed, variable, increases

D) Fixed, variable, stays the same

[Q5] Id a bank has rate-sensitive assest __________ than liabilities, a in interest rates will reduce bank profits, while a_____________ in interest rates will raise bank profits.

A) fewer; rise; rise

B) fewer; decline; decline

C) more; rise; decline

D) more; decline; rise

[Q6] Which of the following are not reported as assets on a bank's balance sheet?

A) U.S. Treasury securities

B) Checkable deposits

C) Deposits with other banks

D) Cash items in the process of collection

[Q7] Credit risk management tools include:

A) interest rate swaps.

B) duration analysis.

C) deductibles.

D) collateral

	Assets	Liabilities
Rate-sensitive	$40 million	$50 million
Fixed-rate	$60 million	$50 million

[Q8] Assuming that the average duration of its assets is four years, while the average duration of its liabilities is three years, then a 5 percentage point increase in interest rates will cause the net worth of First National Bank to ______ by ______ of the total original asset value.

A) decline; 10 percent

B) increase; 20 percent

C) decline; 5 percent

D) decline; 15 percent

[Q9] If interest rates rise by 5 percentage points, say from 10% to 15%, bank profits (measured using gap analysis) will ______.

A) decline by $0.5 million

B) decline by $2.5 million

C) decline by $1.5 million

D) increase by $2.0 million

Reference no: EM131095668

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