Bank Performance

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Question 1
Free
Multiple Choice

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

Choose correct answer/s
A

net interest margin.

B

the spread.

C

gross interest income.

D

net interest income.

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Question 2
Free
Multiple Choice

Interest paid on deposits and borrowed funds is called

Choose correct answer/s
A

net interest expense.

B

net interest margin.

C

gross interest expense.

D

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:

Choose correct answer/s
A

noninterest income

B

components of net interest margin

C

components of net interest income

D

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:

Choose correct answer/s
A

declining over time.

B

rising over time.

C

constant over time.

D

consistently negative.

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Question 5
Free
Multiple Choice

Net income measured as a percentage of assets is

Choose correct answer/s
A

return on equity (ROE).

B

return on liabilities (ROL).

C

return on investment (ROI).

D

return on assets (ROA).

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Question 6
Multiple Choice

When only equity counts as capital, the leverage measure is

Choose correct answer/s
A
equal to the capital ratio.
B
equal to return on assets.
C
the inverse of return on assets.
D
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

Choose correct answer/s
A
lower the leverage measure.
B
lower the degree of financial leverage.
C
higher the leverage measure.
D
A and B
E
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 ____ .

Choose correct answer/s
A
reduced; not affected
B
reduced; reduced
C
not affected; reduced
D
not affected; not affected
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Question 9
Multiple Choice

Gross interest expense is affected by

Choose correct answer/s
A
market interest rates.
B
the composition of assets held by the bank.
C
fee services provided by the bank.
D
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

Choose correct answer/s
A
decrease
B
increase
C
stay the same.
D
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

Choose correct answer/s
A
net interest margin.
B
gross interest margin.
C
net income.
D
income before taxes.
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Question 12
Multiple Choice

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

Choose correct answer/s
A
high return on assets, high capital ratio
B
high return on assets, low capital ratio
C
low return on assets, low capital ratio
D
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.

Choose correct answer/s
A
higher; higher
B
higher; lower
C
lower; higher
D
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.

Choose correct answer/s
A
less; lower
B
less; higher
C
more; higher
D
more; lower
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Question 15
Multiple Choice

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

Choose correct answer/s
A
Noninterest income
B
Loan loss provision
C
Securities gains and losses
D
Noninterest expenses
E
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.

Choose correct answer/s
A
does; does
B
does; does not
C
does not; does not
D
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.

Choose correct answer/s
A
does; does
B
does; does not
C
does not; does not
D
does not; does
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Question 18
Multiple Choice

A bank's net interest margin includes

Choose correct answer/s
A
noninterest expenses.
B
noninterest income.
C
loan losses
D
none of the above
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Question 19
Multiple Choice

Banks with relatively ____ ROAs often incur ____ noninterest expenses.

Choose correct answer/s
A
low; very low
B
low; very high
C
high; very high
D
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 ____ .

Choose correct answer/s
A
Bank T
B
Bank V
C
Bank Z
D
all banks are the same
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