1- The small capital base of banks makes them sensitive to negative earn True False
Q: regulators
A: Banking regulators serve as a guidepost to monitor the activities of banks across the region. They…
Q: Which of the following statements about bank capital are TRUE? Banks hold equity capital to make…
A: Banks Capital = Banks Assets - Banks Liabilities Banks capital is a representation of the net worth…
Q: Determine whether the sentences are True Or False: 1) Stabilizing the economy is the primary…
A: 1) Answer: False Central banks have the main task of stabilizing economy. Commercial banks have the…
Q: Which is not a management practice for reducing the problems of adverse selection and moral hazard…
A: Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: TRUE OR FALSE 1. Short-term financial policies that are flexible with regard to current assets…
A: 1. Short-term financial policies that are flexible with regard to current assets includes keeping…
Q: Select all that are true regarding credit risk for a bank. OThis risk is an estimate of future…
A: Credit risk: It is the risk that is faced by the bank when borrower fails to make payment in a…
Q: Explain how capital adequacy requirements may affect a commercial bank’s dividend payout and growth…
A: Capital adequacy requirement refers to the amount of capital a bank must have as per the requirement…
Q: Small savers prefer to use financial intermediaries rather than lending directly to borrowers…
A: Financial intermediaries are those institutions which helps in transferring the funds from the units…
Q: If a bank wants to avoid volatility in its regulatory capital, which investment classification would…
A: Answer: If banks want to volatility in regulatory capital, wanting banking organizations are likely…
Q: How banks can improve their return on equity and what are its negative externalities.
A: RoE is ubiquitous in banks, serving as both an indicator of overall performance and a means of…
Q: hich one is not an incentive for a bank to Securitize its mortgage loans? A) Reduce insurance…
A: The objective of the question is to identify which among the given options is not a reason for a…
Q: Distinguish between illiquidity and insolvency for banks and discuss the role of capital in…
A: liquidity is considered as the short-term problem of banks where they are unable to make payments…
Q: What are the advantages and disadvantages of direct lending for the bank? How are banks reducing the…
A: Direct lending refers to a type of lending that is provided directly by the lender, such as a bank,…
Q: FinTech firms are facing increased regulatory oversight. A risk event at a FinTech firm can result…
A: The danger of losing money on an investment or business endeavor is referred to as financial risk.…
Q: b) Why is the risk-adjusted return on capital (RAROC) an important tool in credit risk management…
A: The risk-adjusted return on capital (RAROC) is an important tool in credit risk management for…
Q: Select all that are true regarding liquidity risk for a bank. O Consumer trust in the bank ensures a…
A: The answer is provided below.
Q: When a bank holds a lower level of capital, a given dollar level of profits represents a lower…
A: False
Q: If a bank has a negative gap, it is likely that it has a: a. positive duration gap. b. negative…
A: interest rate gap give the risk of interest on assets and laibilties Negative gap indicates that…
Q: What are the disadvantages of the financial intermediaries and the negative ways they can impact the…
A: A financial intermediary is that entity that acts as a middleman in a financial transaction taking…
Q: A bank that grants loans to firms in a many different lines of business: will increase its…
A: When a bank grants loans to firms in different lines of business then it has to incur more expenses…
Q: Why is it that oftentimes banks refuse to lend to many borrowers even though they offer high…
A: Analysis of the given option: i) To reduce the exposure to diversification risk Remark-By…
Q: What are the advantages and disadvantages of using financial leverage? Answer from the banker’s…
A: Financial leverage is a firm’s capability of borrowing so that the funds raised could be used to…
Q: If a bank finds that its ROE is too low because it has toomuch bank capital, what can it do to raise…
A: ROE (Return on Equity):-It is the ratio that helps in analyzing a company's profit from shareholder…
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- When a bank holds a lower level of capital, a given dollar level of profits represents a lower return on equity. Group of answer choices: True False4. Which of the following is false about the risk-shifting problem? Risk-shifting leads to a transfer of value from debt-holders to equity holders Risk-shifting leads prospective lenders to pay less for debt and require higher interest payments Risk-shifting arises when shareholders choose negative NPV projects with higher risk Risk-shifting is an example of an agency cost of debt Risk-shifting is greater in firms with low leverageWhat are the disadvantages of the financial intermediaries and the negative ways they can impact the economy?
- Q1)B. Determine whether the sentences are True Or False: 1) Stabilizing the economy is the primary function of Commercial banks ( -------------- ) 2) The Credit creation activity can raise aggregate demand which leads to more production in the economy( -------------- ) 3) Risk aversion is the difference between the return on a risky asset and less risky asset, which serves as compensation for investors to hold riskier securities ( -------------- ) 4) The transfer of risk occurs in the capital markets ( -------------- ) 5) The tighter the probability distributions of expected future returns, the higher the risk of a given investment(-------------- ).2. If the value of the financial sector is in terms of reducing the individual risk in the economy, how could you measure the value of the financial sector without using information on loan payments (broadly construed to include any interest payment necessary to measure an interest rate or any payment that looks like a return on an investmemt)? If we think of the amount of individual risk remaining after individuals buy portfolios is a measure of the ineffectiveness of the financial sector [or its imperfections], what do you think accounts for these imperfections?Finance ethics is important because misconducts and their causes often leave economies with negative after effects. Discuss three (3) misconducts and their causes that justify the need for finance ethics
- 3. Which of the following statements is false about the agency costs of free cash flow (FCF)? Managers of firms with high FCFs may make negative NPV investments The free cash flow problem is more severe for firms with high cash flows but many profitable investment opportunities The free cash flow problem is more severe for firms with high debt in their capital structure Managers have incentives to grow firms more than optimal to increase their power and resources under their control Managers have incentives to grow firms more than optimal to increase their compensation and promotion prospectsThe asymmetric information problems that act as a barrier to efficient allocation of capital is referred to as financial friction. When financial friction increases, economic activity declines. A financial crisis occurs when information flows in financial markets experience a large disruption, with the result that financial friction increases sharply and the markets stop functioning, economic activity will collapse. Discuss the dynamics of financial crises in advanced economies.Explain how capital adequacy requirements may affect a commercial bank’s dividend payout and growth potential. If the bank anticipates a decrease in its capital adequacy ratio (capital to total asset ratio), what options are available to prevent the decline? What risks, if any, are there in each strategy... Banks’ managers do not want to mmaintain much capital because they do not bear fully the costs of their failure. In addition to this reason others claim that banks’ managers do not want to maintain higher levels of capital because higher levels of capital attract greater scrutiny from bank regulators. Comment on this claim. The two most pressing demands for liquidity from a bank come from, first, customers withdrawing their deposits. Identify and discuss the second demand on the bank for liquidity.
