Bank Performance

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Question 1

Free

Multiple Choice

Interest income generated from all a bank's assets is called

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net interest margin.

the spread.

gross interest income.

net interest income.

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Question 2

Free

Multiple Choice

Interest paid on deposits and borrowed funds is called

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net interest expense.

net interest margin.

gross interest expense.

net spread expense.

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Question 3

Free

Multiple Choice

Fees charged by a bank on various services allow the bank to generate:

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noninterest income

components of net interest margin

components of net interest income

components of gross interest income

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Question 4

Free

Multiple Choice

If a bank has short-term deposits and provides long-term fixed-rate loans, and interest rates decline over time, its net interest margin should be:

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declining over time.

rising over time.

constant over time.

consistently negative.

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Question 5

Free

Multiple Choice

Net income measured as a percentage of assets is

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return on equity (ROE).

return on liabilities (ROL).

return on investment (ROI).

return on assets (ROA).

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Question 6

Multiple Choice

When only equity counts as capital, the leverage measure is

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equal to the capital ratio.

equal to return on assets.

the inverse of return on assets.

the inverse of the capital ratio.

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Question 7

Multiple Choice

When only equity counts as capital, the higher the capital ratio, the

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lower the leverage measure.

lower the degree of financial leverage.

higher the leverage measure.

A and B

B and C

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Question 8

Multiple Choice

If a bank increases its provisions for loan losses, its interest income is , and its noninterest income is .

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reduced; not affected

reduced; reduced

not affected; reduced

not affected; not affected

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Question 9

Multiple Choice

Gross interest expense is affected by

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market interest rates.

the composition of assets held by the bank.

fee services provided by the bank.

A and B

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Question 10

Multiple Choice

If a bank has long-term fixed-rate assets and short-term liabilities, and interest rates increase over time, its net interest margin should

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decrease

increase

stay the same.

either A or B, depending on whether the asset maturities exceed 10 years

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Question 11

Multiple Choice

The sum of net interest income, noninterest income, and securities gains, minus the provision for loan losses and noninterest expenses equals

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net interest margin.

gross interest margin.

net income.

income before taxes.

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Question 12

Multiple Choice

Which of the following banks would likely have the highest return on equity?

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high return on assets, high capital ratio

high return on assets, low capital ratio

low return on assets, low capital ratio

low return on assets, high capital ratio

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Question 13

Multiple Choice

Banks A and B have the same net income. Bank A has a higher capital ratio and more assets than B. Bank A's return on assets is than Bank B's. Bank A's return on equity is than BankB's.

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higher; higher

higher; lower

lower; higher

lower; lower

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Question 14

Multiple Choice

Banks G and H are the same size and have similar operations. Bank G holds the minimum level of capital, and Bank H holds a higher level of capital. Bank G's return on equity is probably volatile than that of Bank H. Bank G's risk premium is probably than that of Bank H.

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less; lower

less; higher

more; higher

more; lower

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Question 15

Multiple Choice

____ result(s) from a bank's sale of securities.

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Noninterest income

Loan loss provision

Securities gains and losses

Noninterest expenses

none of the above

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Question 16

Multiple Choice

A bank's ROE account for its financial leverage. A bank's ROA account for its financial leverage.

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does; does

does; does not

does not; does not

does not; does

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Question 17

Multiple Choice

A bank's ROA account for taxes on earnings. A bank's ROE account for taxes on earnings.

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does; does

does; does not

does not; does not

does not; does

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Question 18

Multiple Choice

A bank's net interest margin includes

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noninterest expenses.

noninterest income.

loan losses

none of the above

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Question 19

Multiple Choice

Banks with relatively ROAs often incur noninterest expenses.

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low; very low

low; very high

high; very high

none of the above

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Question 20

Multiple Choice

Bank T generally obtains a high percentage of its funds from negotiable certificates of deposit (NCDs). Bank V obtains most of its funds from retail CDs. Bank Z obtains its funds from checkingaccounts. The bank that will likely incur the highest interest expense is ____ .

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Bank T

Bank V

Bank Z

all banks are the same

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Bank Performance

Interest income generated from all a bank's assets is called

Interest paid on deposits and borrowed funds is called

Fees charged by a bank on various services allow the bank to generate:

If a bank has short-term deposits and provides long-term fixed-rate loans, and interest rates decline over time, its net interest margin should be:

Net income measured as a percentage of assets is

When only equity counts as capital, the leverage measure is

When only equity counts as capital, the higher the capital ratio, the

If a bank increases its provisions for loan losses, its interest income is ____ , and its noninterest income is ____ .

Gross interest expense is affected by

If a bank has long-term fixed-rate assets and short-term liabilities, and interest rates increase over time, its net interest margin should

The sum of net interest income, noninterest income, and securities gains, minus the provision for loan losses and noninterest expenses equals

Which of the following banks would likely have the highest return on equity?

Banks A and B have the same net income. Bank A has a higher capital ratio and more assets than B. Bank A's return on assets is ____ than Bank B's. Bank A's return on equity is ____ than BankB's.

Banks G and H are the same size and have similar operations. Bank G holds the minimum level of capital, and Bank H holds a higher level of capital. Bank G's return on equity is probably ____ volatile than that of Bank H. Bank G's risk premium is probably ____ than that of Bank H.

____ result(s) from a bank's sale of securities.

A bank's ROE ____ account for its financial leverage. A bank's ROA ____ account for its financial leverage.

A bank's ROA ____ account for taxes on earnings. A bank's ROE ____ account for taxes on earnings.

A bank's net interest margin includes

Banks with relatively ____ ROAs often incur ____ noninterest expenses.

Bank T generally obtains a high percentage of its funds from negotiable certificates of deposit (NCDs). Bank V obtains most of its funds from retail CDs. Bank Z obtains its funds from checkingaccounts. The bank that will likely incur the highest interest expense is ____ .

If a bank increases its provisions for loan losses, its interest income is , and its noninterest income is .

Banks A and B have the same net income. Bank A has a higher capital ratio and more assets than B. Bank A's return on assets is than Bank B's. Bank A's return on equity is than BankB's.

Banks G and H are the same size and have similar operations. Bank G holds the minimum level of capital, and Bank H holds a higher level of capital. Bank G's return on equity is probably volatile than that of Bank H. Bank G's risk premium is probably than that of Bank H.

A bank's ROE account for its financial leverage. A bank's ROA account for its financial leverage.

A bank's ROA account for taxes on earnings. A bank's ROE account for taxes on earnings.

Banks with relatively ROAs often incur noninterest expenses.