商業(yè)銀行管理彼得S.羅斯英文原書(shū)第8版-英語(yǔ)試題庫(kù)Chap006

PAGE

98

TestBank,Chapter6

PAGE

99

Rose/Hudgins,BankManagementandFinancialServices,8/e

Chapter6

MeasuringandEvaluatingthePerformanceofBanksandTheirPrincipalCompetitors

FillintheBlankQuestions

1. Theequitymultiplierforabankmeasurestheamountof_____________________ofthebankandisonepartoftheevaluationofthebank'sROE.

Answer:leverage(debt)

2. __________________________istheriskthathastodowiththequalityofthebank'sassetsand,inparticular,thebank'sloans.

Answer:Creditrisk

3. Solvency(orcapital)riskforabankcanbemeasuredby__________________________.Listonewaysolvencyriskcanbemeasured.

Answer:PurchasedFunds/TotalLiabilities(Thereareseveralotherratiosthatcananswerthisquestionaswell)

4. __________________________aretheassetsofafinancialinstitutionthatwillmatureorberepricedwithinasetperiodoftime.

Answer:InterestSensitiveAssets

5. __________________________istheriskthatthevalueofthefinancialinstitution'sassetportfolio(particularlygovernmentorothermarketablesecurities)willdeclineinvalue.

Answer:Marketrisk

6. Eurodollars,FedFunds,RepurchaseAgreements,andlargeCDstogetherareknowas_____________________.

Answer:PurchasedFunds

7. __________________________istheriskthatthefinancialinstitutionmaynotbeabletomeettheneedsofdepositorsforcash.

Answer:Liquidityrisk

8. __________________________areloanswhicharepastdueby90daysormore.

Answer:Nonperformingloans

9. __________________________reflectsthebank'sportfoliomanagementpoliciesandthemixandyieldonthebank'ssecuritiesandisonepartoftheevaluationofROE.

Answer:Assetutilization

10. __________________________reflectstheeffectivenessoftheexpensemanagementofthebankandisonepartoftheevaluationofROE.

Answer:Netprofitmargin

11. __________________________measuresthereturntostockholdersontheirinvestmentinthebank.Itistheproductofnetprofitmargin,assetutilizationandtheequitymultiplier.

Answer:ROE

12. __________________________measurestheamountofdebtorleverageabankhasandisonepartoftheevaluationofthebank'sROE)Itisgenerallyanumberlargerthanone.

Answer:Equitymultiplier

13. The__________________________isastandardizedreportprovidedbyfederalregulatorswhichreportsthebalancesheet,incomestatementandotherdataforallfederallysupervisedbanks.Ithasthisyear'sdataaswellasthreepreviousyearsandalsocontainsinformationonpeerinstitutions.

Answer:UniformBankPerformanceReport

14. __________________________measuresthebank'sriskoflongrunsurvival.Itmeasuresthebank'scapitalpositionandshowsiftherehasbeenanyerosionofcapitalovertime.

Answer:Solvencyrisk(orcapitalrisk)

15. __________________________istheriskthatshiftinginterestratesinthemarketwilladverselyaffectafinancialinstitution'snetincomeorthevalueofitsassetsorequity.

Answer:Interestraterisk

16. The____________________Actrestrictscombinedauditingandconsultingrelationshipsinordertopromoteauditorindependenceandobjectivity.

Answer:Sarbanes-Oxley

isoneofthemostwidelyrespectedprivateinstitutionsthatratesthecreditqualityoffinancialinstitutions.

Answer:Thomson’sBankWatch,Inc.

referstotheuncertaintyregardingthefinancialfirm’searningsduetofailuresincomputersystems,errors,misconductbyemployees,lighteningstrikesandsimilarevents.

Answer:Operational(transactional)risk

referstovariabilityinearningsresultingfromactionstakenbythelegalsystemincludingunenforceablecontracts,lawsuitsandadversejudgements.

Answer:Legalrisk

includesviolationsofrulesandregulations.Itcanincludefailuretoholdadequatecapitalwhichcanleadtocostlycorrectiveactions.

Answer:Compliancerisk

istheuncertaintyassociatedwithpublicopinion.Negativepublicity(whethertrueornot)canaffectafinancialfirm’searningsbydissuadingcustomersfromusingtheservicesoftheinstitution.

Answer:Reputationrisk

Asdataprocessingoffinancialinformationbecomesmoreimportant,managersoffinancialfirmscanrealizecostsavingsfrom,transferringtasksfrominsidetofirmitselftootherfirmsspecializingininformationtechnology.

Answer:outsourcing

Atraditionalmeasureofearningsefficiencyistheortotalinterestincomeovertotalearningsassetslesstotalinterestexpensesovertotalinterestbearingbankliabilities.Itmeasurestheeffectivenessofafirm’sintermediationfunctionintheborrowingandlendingofmoney.

Answer:earningsspread

OnepartofROEisornetincomeoverpre-taxnetoperatingincomewhichmeasuresthefinancialfirm’suseofsecuritygainsandlossesandothertaxmanagementtoolstominimizetaxexposure.

Answer:taxmanagementefficiency

Netprofitmargincanbesplitintotwoparts,andtaxmanagementefficiency.Thefirstpartispre-taxnetoperatingincomeovertotaloperatingrevenuewhichlooksathowmanydollarsofrevenuesurviveafteroperatingexpensesareremoved.

Answer:expensecontrolefficiency

True/FalseQuestions

T F 26. Financialinstitutionsthatpursuethe"quietlife"asagoalarereallypursuingriskminimization.

Answer:True

T F 27. Attemptingtomaximizeabank'sstockvalueisthekeyobjectiveforbankswhichshouldhavepriorityoverallotherbankgoals.

Answer:True

T F 28. Iftheexpectedstreamoffuturebankshareholderdividendsrises,abank'sstockpriceshouldalsorise,otherfactorsheldconstant.

Answer:True

T F 29. Ifthediscountfactorassociatedwiththevalueofabank'sstockrises,thebank'sstockpriceshouldrise,otherfactorsheldconstant.

Answer:False

T F 30. Abank'sROAequalsitsROEtimestheratiooftotalassetsdividedbytotalequitycapital.

Answer:False

T F 31. Accordingtothetextbookabank'sasset-utilizationratioreflectsthemixandyieldonthebank'sportfolioofassets.

Answer:True

T F 32. Thebank'sprofitmarginorratioofnetafter-taxincometototaloperatingrevenueisameasureoffinancialleverageforabank.

Answer:False

T F 33. Theratioofabank'snetafter-taxincometopre-taxnetoperatingincomeisdescribedinthetextasameasureoftaxmanagementefficiency.

Answer:True

T F 34. Inthetextbooktheratioofpretaxnetoperatingincometototaloperatingrevenuesisdescribedasameasureoftheeffectivenessofafinancialinstitution’sexpense-controlefficiency.

Answer:True

T F 35. Theratioofnon-performingassetstototalloansandleasesisameasureofcreditriskinbanking.

Answer:True

T F 36. Themeasureofabank'sefficiencyandreturnknownasthe"earningsspread"subtractstotalinterestexpensesfromallthebank'sinterestincomeandthesetwoitemsarethendividedbytotalassets.

Answer:False

T F 37. InrecentyearstheU.S.bankingindustry'sequitymultiplierhasgenerallyriseninresponsetoregulatorypressuretoraisemorecapital.

Answer:False

T F 38. Ifabankaddsmorefull-timeemployeesandpoststhesamenetoperatingincome,itsemployeeproductivityratio,asdefinedinthetext,mustfall.

Answer:True

T F 39. ThemostprofitableU.S.banksintermsofbothROAandROEaremedium-sizeinstitutionsintheassetsizerangeof$100millionto$10billion,accordingtothetextbook.

Answer:True

T F 40. ROAmeasureshowcapablythemanagementofafinancialinstitutionhasbeenconvertingtheinstitution'sassetsintonetearnings.

Answer:True

T F 41. Thenoninterestmarginisgenerallypositiveformostbanks.

Answer:False

T F 42. Theratioofnonperformingassetstototalloansandleasesisconsideredtobeameasureofabank'smarketrisk.

Answer:False

T F 43. Charge-offsrepresentsecuritiesabankdecidestosellbecausetheyhavedeclinedinvalue.

Answer:False

T F 44. Loanspastduefor90daysormoreareclassifiedasnonperformingassets.

Answer:True

T F 45. Theratioofcashandgovernmentsecuritiestototalassetsisconsideredtobeameasureofliquidityriskinbanking.

Answer:True

T F 46. Theratioofuninsureddepositstototaldepositsisconsideredtobeameasureofcreditriskinbanking.

Answer:False

T F 47. Theinterestratespreadbetweenmarketyieldsonbankdebtissues(suchascapitalnotesandCDs)andthemarketyieldsongovernmentsecuritiesofthesamematurityisconsideredtobeameasureofmarketriskinbanking.

Answer:False

T F 48. Theratioofabank'snetoperatingincometothenumberofabank'sfull-time-equivalentemployeesiscalledtheemployeeproductivityratio.

Answer:True

T F 49. Smallerbanksusuallyhavefewerliquidassetsthanlargerbanks.

Answer:False

T F 50. Thebank'sassetutilizationratioreflectstheeffectivenessofthebank'sexpensemanagement.

Answer:False

T F 51. TheFDICisaprivatecreditratingcompanywhichprovidescreditratingsontheshorttermandlongtermsecuritiesissuedbybanks.

Answer:False

T F 52. Duringthe1980'stheComptrolleroftheCurrency,theFederalReserveandtheFDICcreatedanewtooltohelpthemanalyzethefinancialconditionofbanks.ThisnewtooliscalledtheUniformBankPerformanceReport.

Answer:True

T F 53. Liquidityriskforabankexaminesthequalityofthebank'sassetsand,inparticular,thequalityofthebank'sloans.

Answer:False

T F 54. Thebank'sdegreeofassetutilization(AU)orratiooftotaloperatingrevenuetototalassetsisameasureofassetmanagementefficiency,especiallyintermsofthemixandyieldonassets.

Answer:True

T F 55. AccordingthecasestudyofthefailureofSuperiorBankofChicagoandtheFDIC’stakeoverofthisinstitutionin2001,themainproblemwasattributedtomisleadingaccountingpracticesofinflatingassetvaluesandrevenuesdeflatingliabilitiesandexpenses.TheSarbanes-OxleyAccountingStandardsActof2002addressesthisissueandexpresslyencouragescombiningauditingandconsultingrelationshipsinordertopromoteefficiencyandprofitabilityoffinancialinstitutions.

Answer:False

MultipleChoiceQuestions

Theratioofabank'sinterestincomefromitsloansandsecurityinvestmentslessinterestexpensesondebtissueddividedbytotalearningassetsmeasuresabank's:

A) Netoperatingmargin

B) Netreturnbeforespecialtransactions

C) Netinterestmargin

D) Returnonassets

E) Noneoftheabove

Answer:C

ROEforabankiscalculatedby:

A) Dividingnetafter-taxincomebytotalequitycapital.

B) Dividingtotaloperatingrevenuelessoperatingexpensesbytotalassets.

C) Deductingtotalinterestexpensesfromtotalinterestincomeanddividingbytotalequitycapital.

D) Noninterestincomelessnoninterestexpensesdividedbytotalearningassets.

E) Noneoftheabove.

Answer:A

Thedifferencebetweensuchsourcesofbankincomeasservicechargesondepositsandtrust-servicefeesandsuchsourcesofbankexpensesassalariesandwagesandoverheadexpensesdividedbytotalassetsortotalearningassetsiscalledthe:

A) Netprofitmargin

B) Netoperatingmargin

C) Netnoninterestmargin

D) Netreturnonassets

E) Noneoftheabove

Answer:C

Abank'sROEequalsitsROAtimesits:

A) Netprofitmargin

B) Totalassetsdividedbytotalequitycapital

C) Totaloperatingrevenuesdividedbytotalassets

D) Ratioofnetafter-taxincometototaloperatingrevenues

E) Noneoftheabove.

Answer:B

Theearningsspreadforabankisequalto:

A) Totalinterestincomedividedbytotalearningassetslesstotalinterest-expensedividedbytotalinterest-bearingbankliabilities.

B) Totalinterestincomelesstotalinterestexpensesdividedbyearningassets.

C) Totaloperatingrevenueslesstotaloperatingexpensesdividedbytotalassets.

D) Totalcashandnoncashexpensessubtractedfrominterestandnoninterestincomedividedbytotalassets.

E) Noneoftheabove.

Answer:A

Theso-calledemployeeproductivityratioforabankisequalto:

A) Netoperatingrevenuelesstotalinterestexpensesperemployee.

B) Totalinterestandnoninterestexpenseperemployee

C) Netoperatingincomeperfull-time-equivalentemployee

D) Totaloperatingearningslesssalariesandwagesexpenseperemployee.

E) Noneoftheabove.

Answer:C

AccordingtothetextbookthemostprofitablebanksintheUnitedStatesin2007fellintheassetsizerangeof:

A) Under$25millionintotalassets

B) Under$100millionintotalassets

C) Between$100millionand$10billionintotalassets

D) Over$10billionintotalassets

E) Noneoftheabove.

Answer:D

Abank'sstockpricewilltendtoriseifthe:

A) Valueofthestreamoffuturestockholderdividendsisexpectedtoincrease

B) Thebankingorganization'sperceivedlevelofriskhasfallen

C) Expecteddividendsincrease,whileperceivedlevelofriskdeclines

D) Alloftheabove.

E) Noneoftheabove.

Answer:D

Theratiothatequalstotalinterestincomedividedbytotalearningassetslesstotalinterestexpensedividedbytotalinterest-bearingliabilitiesisknownasthe:

A) Earningsbase

B) Earningsspread

C) Netincomemargin

D) Netreturnpriortospecialtransactions

E) Noneoftheabove

Answer:B

Whatdoloansandsecurityinvestmentsrepresentforabank?

A) Earningassets

B) Classifiedassets

C) Discretionaryaccounts

D) Market-valuedassets

E) Noneoftheabove

Answer:A

Theso-calledtax-managementefficiencyratioconsistsof:

A) Totaltaxliabilitiesovernetincome

B) Tax-exemptassetsovertaxableassets

C) Netincomeoverpre-taxnetoperatingincome

D) Taxesowedovertotalliabilitiesofabank

E) Noneoftheabove.

Answer:C

Theratioofnetloanstototalassetsisconsideredtobeameasureofwhatformofriskinbanking?

A) Creditrisk

B) Liquidityrisk

C) Marketrisk

D) Interest-raterisk

E) Noneoftheabove

Answer:B

OEforabankreflects:

A) Howwelltheassetsofthebankaremanaged

B) Thebank'suseofleverage

C) Howwellthebankcontrolsexpenses

D) Alloftheabove

E) Noneoftheabove

Answer:D

Aratiothatcanbeusedtomeasureabank'screditriskwouldbe:

A) Netloans/totalassets

B) Interestsensitiveassets/interestsensitiveliabilities

C) Totalassets/numberoffulltimeemployees

D) Nonperformingloans/totalloans

Answer:D

Abankthathasalowprofitmarginmostlikely:

A) Isdoingapoorjobofcontrollingexpenses

B) Hasasmallamountoffinancialleverage

C) Hasasmallamountofliquidityrisk

D) Hasassetsthatarenotveryproductive

E) Noneoftheabove

Answer:A

Abankthathasahighassetutilization(AU)ratiomostlikely:

A) Isdoingapoorjobofcontrollingexpenses

B) Hasasmallamountoffinancialleverage

C) Hasasmallamountofliquidityrisk

D) Isallocatingassetstothemostproductiveinvestments

E) Noneoftheabove

Answer:D

Whichofthefollowingwouldbethebestexampleofaratiousedtoexaminethecostofoneofthebank'sliabilities?

A) Demanddeposits/totalassets

B) Interestontimedeposits/totaltimedeposits

C) Interestonrealestateloans/totalrealestateloans

D) Interestsensitiveassets/interestsensitiveliabilities

Answer:B

Whichofthefollowingwouldbethebestexampleofaratiousedtoexaminethereturnofoneofthebank'sassets?

A) Demanddeposits/totalassets

B) Interestontimedeposits/totaltimedeposits

C) Interestonrealestateloans/totalrealestateloans

D) Interestsensitiveassets/interestsensitiveliabilities

Answer:C

Whichofthefollowingwouldbethebestexampleofaratiousedtoexaminethebank'sinterestraterisk?

A) Demanddeposits/totalassets

B) Interestontimedeposits/totaltimedeposits

C) Interestonrealestateloans/totalrealestateloans

D) Interestsensitiveassets/interestsensitiveliabilities

Answer:D

Abankexpectstopayadividendnextyearof$3.45andalsoexpectsdividendstogrowatarateof7%fromnowon.Iftheappropriatediscountrateis15%,whatshouldthisbank'sstockpricebeinthemarket?

A) $23.00

B) $43.13

C) $46.14

D) $49.29

E) $24.61

Answer:B

UsingtheinformationlistedbelowforCarterStateBank,whatisthisbank'sROE?

Netincome

$55million

Totaloperatingrevenue

$650million

Totalassets

$4,055million

Totalequitycapital

$350million

A) 8.46percent

B) 16.03percent

C) 15.71percent

D) 1.36percent

E) Noneoftheabove

Answer:C

UsingtheinformationlistedbelowforCarterStateBank,whatisthisbank'sROA?

Netincome

$55million

Totaloperatingrevenue

$650million

Totalassets

$4,055million

Totalequitycapital

$350million

A) 8.46percent

B) 16.03percent

C) 15.71percent

D) 1.36percent

E) Noneoftheabove

Answer:D

UsingtheinformationlistedbelowforCarterStateBank,whatisthisbank'snetprofitmargin?

Netincome

$55million

Totaloperatingrevenue

$650million

Totalassets

$4,055million

Totalequitycapital

$350million

A) 8.46percent

B) 16.03percent

C) 15.71percent

D) 1.36percent

E) Noneoftheabove

Answer:A

UsingtheinformationlistedbelowforCarterStateBank,whatisthisbank'sassetutilizationratio?

Netincome

$55million

Totaloperatingrevenue

$650million

Totalassets

$4,055million

TotalequityCapital

$350million

A) 8.46percent

B) 16.03percent

C) 15.71percent

D) 1.36percent

E) Noneoftheabove

Answer:B

TheTRCBankhasanetprofitmarginof7.5%,anassetutilizationratioof18%,anequitymultiplierof20times.Whatisthisbank'sROA?

A) 27.00percent

B) 1.35percent

C) 7.50percent

D) 1.50percent

E) 3.6percent

Answer:B

TheTRCBankhasanetprofitmarginof7.5%,anassetutilizationratioof18%,anequitymultiplierof20times.Whatisthisbank'sROE?

A) 27.00percent

B) 1.35percent

C) 7.50percent

D) 1.50percent

E) 3.6percent

Answer:A

TheSmith-JamesBankhasanROEof17.5%,anassetutilizationratioof13%andanetprofitmarginof9%.Whatisthisbank'sROA?

A) 14.96percent

B) 1.58percent

C) 1.17percent

D) 134.62percent

E) Noneoftheabove

Answer:C

TheSmith-JamesBankhasanROEof17.5%,anassetutilizationratioof13%andanetprofitmarginof9%.Whatmustthisbank'sequitymultiplierbe?

A) 14.96times

B) 1.58times

C) 1.17times

D) 134.62times

E) Noneoftheabove

Answer:A

Whatistheequitymultiplierforabankwhereequityisequalto10percentoftotalassets?

A) 90.0

B) 10.0

C) 1.1

D) 110.0

E) 1.0

Answer:

Whichofthefollowingratioswouldbeameasureofcreditrisk?

A) NonperformingLoans/NetLoans

B) NetLoans/TotalAssets

C) InterestSensitiveAssets/InterestSensitiveLiabilities

D) EquityCapital/TotalAssets

E) Noneoftheabove

Answer:A

Whichofthefollowingratioswouldbeameasureofmarketrisk?

A) NonperformingLoans/NetLoans

B) NetLoans/TotalAssets

C) InterestSensitiveAssets/InterestSensitiveLiabilities

D) EquityCapital/TotalAssets

E) Noneoftheabove

Answer:E

Inrecentyearsbankshavebeen__________profitablethan(as)S&LsandSavingsBanks.

A) More

B) Less

C) As

D) Muchmore

E) Muchless

Answer:A

Operationalriskincludeswhichofthefollowing?

A)Failureofbank’scomputersystem

B)Closureofabankforthreemonthsduetofloodingfromamajorhurricane

C)Embezzlementoffundsofabankbyatellerofthebank

D)Closureofabankfortwoweeksduetoafirefromalighteningstrike

E)Alloftheaboveareexampleofoperationalrisk

Answer:E

BrianSmith,CEOofCarterNationalBank,decidesthatinterestratesaregoingtofallinthefutureandasaresultbuys$100millionin30yearTreasuryBondsforthebank’ssecurityportfolio.Instead,interestratesrisecausingthevalueofthesebondstofall.Thiswouldbeanexampleofwhichofthefollowingtypesofrisk?

A)Operationalrisk

B)Legalrisk

C)Compliancerisk

D)Strategicrisk

E)Reputationrisk

Answer:D

ChaosStateBankhasanoldcomputersystemwhichcangodownforweeksatatime,leavingcustomersunabletoaccesstheiraccountsonline.Manycustomershaveleftthebankforbankswithmorereliablecomputersystems.Whichtypeofriskwouldthisbeanexampleof?

A)Operationalrisk

B)Legalrisk

C)Compliancerisk

D)Strategicrisk

E)Reputationrisk

Answer:A

CarsonCountyStateBankhasaratioofequitycapitaltototalassetsof2.5%.TheFDICwhichregulatesthisbankhasdeterminedthatthisisnotenoughequitycapitalandismakingthebankissuenewstockinthemarket.Inaddition,theyarenotallowingthebanktoissueadividendtotheircurrentstockholders.Whichtypeofriskwouldthisbeanexampleof?

A)Operationalrisk

B)Legalrisk

C)Compliancerisk

D)Strategicrisk

E)Reputationrisk

Answer:C

EverettBankhasjustlearnedthatthereisadisgruntledformeremployeewhohascreatedablogthatistellingeveryonethatEverettBankhashalvedtheircustomerservicerepresentativesandsocustomershavegreatdifficultygettingthroughtoalivepersonwhenthereisaproblemwiththeiraccount.Everettisworriedthattheymaylosecustomersasaresult.Whichtypeofriskwouldthisbeanexampleof?

A)Operationalrisk

B)Legalrisk

C)Compliancerisk

D)Strategicrisk

E)Reputationrisk

Answer:E

NormanBankmadealoanof$1,000,000toJarodLeFevre.JarodhasdeclaredbankruptcyandNormanBankhasjustlearnedthatthejudgeinthecasehasruledthatJaroddoesnothavetopayanyoftheloanbackorforfeitanyofhisassets.Whichtypeofriskwouldthisbeanexampleof?

A)Operationalrisk

B)Legalrisk

C)Compliancerisk

D)Strategicrisk

E)Reputationrisk

Answer:B

ForrestFennellisthinkingaboutinvestinginCapitalCityBank.Heisexaminingcertainratiosofthebankincludingtheratioofnonperformingloanstototalloansandleasesandtheprovisionforloanlossestototalloansandleases.WhattypeofriskisForrestattemptingtomeasurewiththeseratios?

A)Creditrisk

B)Liquidityrisk

C)Marketrisk

D)Interestraterisk

E)Operationalrisk

Answer:A

GeraldWilkensisthinkingaboutinvestinginTallahasseeStateBank.Heisexaminingcertainratiosofthebankincludingtheratioofcashassetsandgovernmentsecuritiestototalassetsandpurchasedfundstototalassets.WhattypeofriskisGeraldattemptingtomeasurewiththeseratios?

A)Creditrisk

B)Liquidityrisk

C)Marketrisk

D)Interestraterisk

E)Operationalrisk

Answer:B

AmyFarmeristhinkingaboutinvestingintheGuthrieNationalBank.Sheisexaminingcertainratiosofthebankincludingtheratioofthebookvalueoftheassetstothemarketvalueoftheassetsandthemarketvalueofthebondsheldbythebanktotheirrecordedvalue.WhattypeofriskisAmyattemptingtomeasurewiththeseratios?

A)Creditrisk

B)Liquidityrisk

C)Marketrisk

D)Interestraterisk

E)Operationalrisk

Answer:C

PaulSmithisthinkingaboutinvestinginCapitalCityBank.Heisexaminingcertainratiosofthebankincludingtheratioofinterestsensitiveassetstointerestsensitiveliabilitiesanduninsureddepositstototaldeposits.WhattypeofriskisPaulattemptingtomeasurewiththeseratios?

A)Creditrisk

B)Liquidityrisk

C)Marketrisk

D)Interestraterisk

E)Operationalrisk

Answer:D

TheGaricStateBankofNewOrleanswasunderwaterforthreeweeksafterHurricaneKatrinahitthestate.Thelobbyisfullofmudandotherdebris.Manyofthevaluablesstoredinthebank’ssafetydepositboxeshavebeenruined.JohnGaric,thePresidentandCEOofthebank,hasbeenworkingnightanddaytoreopenthebank.WhattypeofriskhasJohnbeendealingwith?

A)Creditrisk

B)Liquidityrisk

C)Marketrisk

D)Interestraterisk

E)Operationalrisk

Answer:E

CastleStateBankhasthefollowingfinancialinformation.

BalanceSheet

IncomeStatement

Cash

$100

InterestIncome

$400

SecuritiesInvestments

$600

InterestExpenses

($150)

NetLoans

$1200

Non-InterestIncome

$50

NetPremisesandEquip.

$300

Non-InterestExpenses

($100)

TotalAssets

$2200

ProvisionforLoanLosses

($60)

Deposits

$1100

PreTaxNetOperatingIncome

$140

Non-DepositBorrowings*

$800

SecuritiesGains(Losses)

($40)

EquityCapital

$300

Taxes

($45)

TotalLiabilitiesandEquity

$2200

NetIncome

$55

*AllPurchasedFunds

UsethisinformationtocalculateCastleStateBank’sROE

A)20.45%

B)18.33%

C)12.22%

D)7.33%

E)2.5%

Answer:B

CastleStateBankhasthefollowingfinancialinformation.

BalanceSheet

IncomeStatement

Cash

$100

InterestIncome

$400

SecuritiesInvestments

$600

InterestExpenses

($150)

NetLoans

$1200

Non-InterestIncome

$50

NetPremisesandEquip.

$300

Non-InterestExpenses

($100)

TotalAssets

$2200

ProvisionforLoanLosses

($60)

Deposits

$1100

PreTaxNetOperatingIncome

$140

Non-DepositBorrowings*

$800

SecuritiesGains(Losses)

($40)

EquityCapital

$300

Taxes

($45)

TotalLiabilitiesandEquity

$2200

NetIncome

$55

*AllPurchasedFunds

UsethisinformationtocalculateCastleStateBank’sROA

A)20.45%

B)18.33%

C)12.22%

D)7.33%

E)2.5%

Answer:E

CastleStateBankhasthefollowingfinancialinformation.

BalanceSheet

IncomeStatement

Cash

$100

InterestIncome

$400

SecuritiesInvestments

$600

InterestExpenses

($150)

NetLoans

$1200

Non-InterestIncome

$50

NetPremisesandEquip.

$300

Non-InterestExpenses

($100)

TotalAssets

$2200

ProvisionforLoanLosses

($60)

Deposits

$1100

PreTaxNetOperatingIncome

$140

Non-DepositBorrowings*

$800

SecuritiesGains(Losses)

($40)

EquityCapital

$300

Taxes

($45)

TotalLiabilitiesandEqu