What are the general implications for banks increasing loans and investing less in government securities, other things being the same? Increase in return on assets and increase in liquidity Increase in return on assets and decrease in liquidity Decrease in return on assets and increase in liquidity Decrease in return on assets and decrease in liquidity What are the general implications for banks holding more capital as a percentage of asset rather than less, other things being the same? Increase in return on equity and increase in safety Increase in return on equity and decrease in safety Decrease in return on equity and increase in safety Decrease in return on equity and decrease in safety Which of the following is (are) correct? In general, banks will invest more in treasury securities during weak economic conditions In general, banks will extend more loans during weak economic conditions Both of the above Neither a or b
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What are the general implications for banks increasing loans and investing less in government securities, other things being the same?
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Increase in return on assets and increase in liquidity
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Increase in return on assets and decrease in liquidity
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Decrease in return on assets and increase in liquidity
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Decrease in return on assets and decrease in liquidity
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What are the general implications for banks holding more capital as a percentage of asset rather than less, other things being the same?
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Increase in return on equity and increase in safety
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Increase in return on equity and decrease in safety
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Decrease in return on equity and increase in safety
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Decrease in return on equity and decrease in safety
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Which of the following is (are) correct?
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In general, banks will invest more in treasury securities during weak economic conditions
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In general, banks will extend more loans during weak economic conditions
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Both of the above
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Neither a or b
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4. In
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Anything that affects the price of the underlying asset affects the futures price
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Futures contract price reflects the expected price of the underlying asset as of the settlement date
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Both of the above
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Neither a or b
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Neither a or b
general, which of the following is correct?
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In
rather than remaining unhedged?-
If it has a negative $GAP and if it expects interest rates to increase
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If it has a positive $GAP and if it expects interest rates to decrease
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Both of the above
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Neither a or b
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What are the general implications for banks undertaking more off-
balance sheet activities?-
Increase in fee income, increase in risk
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Increase in fee income, decrease in risk
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Decrease in fee income, increase in risk
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Decrease in fee income, decrease in risk
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general, under which of the following condition would a bank consider hedging interest rate risk
7. In
rather than remaining unhedged?
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If it has a negative $GAP and if it expects interest rates to increase
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If it has a positive $GAP and if it expects interest rates to increase
general, under which of the following condition would a bank consider hedging interest rate risk
c. Both of the above d. Neither a or b
8. Which of the following is (are) correct (in general)?
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Overall, the liquidity risk of finance companies is less than that of other financial institutions.
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Finance companies are not as susceptible to increasing interest rates as are savings institutions.
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Both of the above
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Neither a or b
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