《商业银行经营学》(复习题：附答案)

1、Fill in the Blank Questions(1)_______________________ is a newer service provided by banks where thebank lends money to individuals for the purchase of durable and other goods.Answer: Consumer lending(2)The loosening of government regulation and control of financial institutions iscalled ______ . Answer: deregulation(3)A bank which now offers all of the available financial services is known as a__________bank. Answer: universal(4)A(n) buys and sells securities on behalf of their customers and fortheir own accounts. Examples of this type of financial service provider include Merrill Lynch and Charles Schwab.Answer: security broker (or dealer)(5)One tool that the Federal Reserve uses to control the money supply is___________. The Federal Reserve will buy and sell T-bills when they areusing this tool of monetary policy. Answer: open market operations(6)The federal bank regulatory agency which examines the most banks is the______________. Answer: FDIC(7)The short term securities of the bank, including T-Bills and commercial paper,are often called __________________________ because they are the second line of defense to meet demands for cash. Answer: secondary reserves(8)A(n)__________________________ is a deposit account which pays an interestrate competitive with money market mutual funds and which generally haslimited check writing ability. Answer: money market deposit account(9)__________________________ can be held by individuals andnonprofit institutions, bear interest and permit drafts from being written against the account to pay third parties.Answer: Now accounts(10)T he equity multiplier for a bank measures the amount of_____________________ of the bank and is one part of the evaluation of the bank's ROE. Answer: leverage (debt)(11)__________________________ is the risk that the financial institution may notbe able to meet the needs of depositors for cash. Answer: Liquidity risk(12)A traditional measure of earnings efficiency is the __________________ ortotal interest income over total earnings assets less total interest expenses over total interest bearing bank liabilities. It measures the effectiveness of a firm’s intermediation function in the borrowing and lending of money. Answer:earnings spread(13)T he__________________ is the interest rate that equalizes the current marketprice of a bond with the present value of the future cash flows. Answer: yield to maturity (YTM)(14)_________________________ is the difference between interest-sensitive assetsand interest-sensitive liabilities. Answer: Dollar interest-sensitive gap(15)A(n)_________________________ allows the holder the right to either sellsecurities to another investor (put) or buy securities from another investor (call) for a set price before the expiration date. Answer: option(16)A(n)_________________________ is a contract where two parties exchangeinterest payments in order to save money and hedge against interest rate risk.Answer: interest rate swap(17)A(n)_________________________ is where there is both a minimum and amaximum interest rate set on a loan. Answer: interest rate collar(18)A(n) _________________________ is a contingent claim of the bank that issuesit. The issuing bank, in return for a fee, guarantees the repayment of a loanreceived by its customer or the fulfillment of a contract made by its customer to a third party. Answer: standby credit agreement(19)A relatively new type of credit derivative is a CDO which stands for__________________. Answer: collateralized debt obligation(20)24. Lenders can set aside a group of loans on their balance sheet, issue bonds andpledge the loans as collateral against the bonds in ____________ . These usually stay on the bank’s balance sheet as liabilities. Answer: loan backed bonds (21)D ebt instruments issued by cities, states and other political entities and which areexempt from federal taxes are collectively known as _____________________ .Answer: municipal securities(22)__________________ is the risk that the company whose bonds the financialinstitution owns may retire the entire issue of corporate bonds in advance of their maturity leaving the bank with the risk of earnings losses resulting fromreinvesting the cash at lower interest rates. Answer: Call risk(23)T he _________________________ is the total difference between its sources anduses of funds. Answer: liquidity gap(24)T he oldest approach to meeting liquidity needs which relies on the sale of liquidassets to meet liquidity demands is called _________________________. Answer: asset liquidity management(25)_________________________ are the stable base of deposited funds that are nothighly sensitive to movements in market interest rates and tend to remain with a depository institution. Answer: Core deposits(26)W hen financial institutions tempt customers by paying postage both ways inbank-by-mail services or by offering free gifts such as teddy bears, they arepracticing ___________. Answer: nonprice competition(27)W hen a customer is charged based on the number and kinds of services used, withthe customers that use a number of services being charged less or having some fees waived, this is called __________________ pricing. Answer: relationship (28)__________________ is the amount in excess of par value paid by the bank'sshareholders. Answer: Surplus(29)C ore capital such as common stock, surplus, undivided profits, qualifyingnoncumulative preferred stock, etc. is referred to as __________________ capital as defined by the Basel agreement. Answer: Tier 1(30)T he largest component of capital among banks is ____________. Answer: surplus1、True/False Questions(1)According to the textbook, banks are those financial institutions that today offerthe widest range of financial services of any business firm in the economy.Answer: True(2)The role performed by banks in the economy in which they transform savings intocredit is known as the intermediation role.Answer: True(3)The aging of the population means less savings in the economy for banks to workwith, according to the textbook. Answer: False(4)Banks which offer virtually all financial services are known as universal banks.Answer: True(5)In the United States, fixed fees charged for deposit insurance, regardless of howrisky a bank is, led to a problem known as moral hazard.Answer: True(6)When the Federal Reserve buys T-bills through its open market operations, itcauses the growth of bank deposits and loans to decrease. Answer: False(7)Loans and leases are financial outputs on a financial institution's balance sheet orReport of Condition. Answer: True(8)Off balance sheet items for a bank are fee generating transactions which are notrecorded on their balance sheet. Answer: True(9)A bank's ROA equals its ROE times the ratio of total assets divided by total equitycapital. Answer: False(10)I n the textbook the ratio of pre tax net operating income to total operatingrevenues is described as a measure of the effectiveness of a financial insitution's(12)Usually the principal goal of asset-liability management is to maximize or atleast stabilize a bank's margin or spread. Answer: True(13)A liability-sensitive bank will experience an increase in its net interest margin ifinterest rates rise. Answer: False(14) A futures hedge against interest-rate changes generally requires a bank totake an opposite position in the futures market from its current position in the cash market. Answer: True(15)T he long hedge in financial futures contracts is most likely to be used insituations where a bank would suffer losses due to rising interest rates. Answer: False(16)T he buyer of a loan participation must watch both the borrower and the sellerbank closely. Answer: True(17)I n a CMO, the different tiers (or tranches) of security purchasers face the sameprepayment risk. Answer: False(18)M ost loans that banks sell off their balance sheets carry interest rates that usuallyare connected to long-term interest rates (such as the 30-year Treasury bond rate).Answer: False(19)P repayment risk on securitized assets generally increases when interest rates rise.Answer: False(20)W hen a bank irrevocably guarantees a commercial paper issue, the bank's creditrating substitutes for the borrower's credit rating. Answer: True(21)B orrowed liquidity (liability) management is less risky for a financial institutionthan is asset conversion. Answer: False(22)M ost liquidity problems in banking arise from inside a bank, not from itscustomers. Answer: False(23)D eposits owned by commercial banks and held with other banks are calledcorrespondent deposits.Answer: True(24)T he number one factor households consider in selecting a bank to hold theirchecking account is, according to recent studies cited in this chapter, low fees and low minimum balance. Answer: False(25)W hen a bank temporarily offers higher than average interest rates or lower thanaverage customer fees in order to attract new business they are practicing conditional pricing. Answer: False(26)One fundamental purpose for regulating capital is to limit losses to thefederal government arising from deposit insurance claims. Answer: True(27)U nder the international capital (Basel) agreement Tier 2 capital must be raised toa minimum of 4 percent of risk-weighted assets. Answer: False(28)Recent research suggests that interest-rate contracts display considerably lessrisk exposure than do foreign-currency contracts.Answer: True2、Multiple Choice Questions(1) Drew Davis goes to his local bank to get help developing a financial plan and making investment decisions. Which of the more recent services banks offer is Drew taking advantage of ?A) Getting a consumer loanB) Getting financial adviceC) Managing cashD) Getting venture capital servicesE) Buying a retirement planAnswer: B(2) Jonathan Robbins has a bank account in a bank that does not have a physical branch. Jonathan does all of his banking business over the internet. What type of bank does Jonathan have his account at?A) Virtual BankB) Mortgage BankC) Community BankD) Affiliated BankE) None of the aboveAnswer: A(3) Banks are regulated for which of the reasons listed below?A) Banks are leading repositories of the public's savings.B) Banks have the power to create money.C) Banks provide businesses and individuals with loans that support consumption and investment spending.D) Banks assist governments in conducting economic policy, collecting taxes and dispensing government payments.E) All of the above.Answer: E(4) The equivalent of the Federal Reserve System in Europe is known as the:A) European UnionB) Bank of LondonC) Basle GroupD) European Central BankE) Swiss Bank CorporationAnswer: D(5) A financial institution's bad-debt reserve, as reported on its balance sheet, is called:A) Unearned income or discountB) Allowance for possible loan lossesC) Intangible assetsD) Customer liability on acceptancesE) None of the aboveAnswer: B(6)Nonperforming loans are credits on which any scheduled loan repayments and interest payments are past due for more than:A) 30 daysB) 60 daysC) 90 daysD) 180 daysE) None of the above.Answer: C(7) The so-called employee productivity ratio for a bank is equal to:A) Net operating revenue less total interest expenses per employee.B) Total interest and noninterest expense per employeeC) Net operating income per full-time-equivalent employeeD) Total operating earnings less salaries and wages expense per employee.E) None of the above.Answer: C(8) Which of the following would be the best example of a ratio used to examine the bank's interest rate risk?A) Demand deposits/ total assetsB) Interest on time deposits/ total time depositsC) Interest on real estate loans/ total real estate loansD) Interest sensitive assets/ interest sensitive liabilitiesAnswer: D(9) A bank is asset sensitive if its:A) Loans and securities are affected by changes in interest rates.B) Interest-sensitive assets exceed its interest-sensitive liabilities.C) Interest-sensitive liabilities exceed its interest-sensitive assets.D) Deposits and borrowings are affected by changes in interest rates.E) None of the above.Answer: B(10) A bond has a face value of $1000 and five years to maturity. This bond hasa coupon rate of 13 percent and is selling in the market today for $902. Coupon payments are made annually on this bond. What is the yield to maturity (YTM) for this bond?A) 13%B) 12.75%C) 16%D) 11.45%E) Cannot be calculated from the information givenAnswer: C(11) An option buyer can:A) Exercise the option.B) Sell the option to another buyer.C) Allow the option to expire.D) All of the above.E) A and B only.Answer: D(12) A put option would most likely be used to:A) Protect fixed-rate loans and securities.B) Protect variable-rate loans and securities.C) Offset a positive interest-sensitive gap.D) Offset a negative interest-sensitive gap.E) None of the above.Answer: A(13) A financial institution that buys a put option:A) Has the right to accept delivery of the underlying security at the contract price if they wishB) Has the right to make delivery of the underlying security at the contract price if they wishC) Is obligated to accept delivery of the underlying security at the contract priceD) Is obligated to make delivery of the underlying security at the contract price Answer: B(14) Loan-backed securities, which closely resemble traditional bonds, carry various forms of credit enhancements, which may include all of the following, EXCEPT:A) Credit letter guaranteeing repayment of the securities.B) Set aside of a cash reserve.C) Division into different risk classes.D) Early payment clauses.E) None of the above.Answer: D(15) When two banks simply agree to exchange a portion of their customers' loan repayments, they are using:A) A credit optionB) A standby letter of creditC) A credit linked noteD) A credit swapE) None of the aboveAnswer: D(16) Principal roles that a financial institution's investment portfolio play include which of the following?A) Income stabilityB) Geographic diversificationC) Hedging interest rate riskD) Backup liquidityE) All of the aboveAnswer: E(17) Which of the following statements is (are) correct regarding duration?A) In comparing two bonds with the same yield to maturity and the same maturity, a bond with a higher coupon rate will have a longer duration.B) In comparing two loans with the same maturity and the same interest rate, a fully amortized(分期付款) loan will have a shorter duration than a loan with a balloon payment（付款的最后一笔较大）.C) The duration will always be shorter than the maturity for all debt instruments.D) All of the aboveE) B and CAnswer: B（18） A bank expects in the week about to begin $30 million in incoming deposits, $20 million in deposit withdrawals, $15 million in revenues from the sale of nondeposit services, $25 million in customer loan repayments, $5 million in sales of bank assets, $45 million in money market borrowings, $60 million in acceptable loan requests, $10 million in repayments of bank borrowings, $5 million in cash outflows to cover other operating expenses, and $10 million in dividend payments to its stockholders. This bank's net liquidity position for the week is:A) $30 millionB) $20 millionC) $10 millionD) $15 millionE) None of the aboveAnswer: D（19）Financial institutions face significant liquidity problems because of:A) Imbalances between the maturities of their assets and their principal liabilities.B) Their high proportion of liabilities subject to immediate withdrawal.C) Their sensitivity to changes in interest rates.D) Both A and BE) All of the above.Answer: E（20）A bank determines from an analysis on its deposits that account processing and other operating expenses cost the bank $3.95 per month. It has also determined that its non operating expenses on its deposits are $1.35 per month. The bank wants to have a profit margin which is 10 percent of monthly costs. What monthly fee should this bank charge on its deposit accounts?A) $5.30 per monthB) $3.95 per monthC) $5.83 per monthD) $5.70 per monthE) None of the aboveAnswer: C（21） A bank quotes an APY of 8%. A small business that has an account with this bank had $2500 in their account for half the year and $5000 in their account for the other half of the year. How much in total interest earnings did this bank make during the year?A) $300B) $200C) $400D) $150E) None of the aboveAnswer: A（22）An account at a bank that carries a fixed maturity date with a fixed interest rate and which often carries a penalty for early withdrawal of money is called:A) Demand depositB) Transaction depositC) Time depositD) Money market mutual depositE) None of the aboveAnswer: C（23）The risk that a customer the bank has entered into a contract with will fail to pay or to perform, forcing the bank to find a replacement contract that may be less satisfactory is what form of risk listed below?A) Counterparty riskB) Interest-rate riskC) Operating riskD) Credit riskE) Liquidity riskAnswer: A（24）A bank has a profit margin of 5 percent, an asset utilization ratio of 11 percent , an equity multiplier of 12 and a retention ratio of 60 percent. What is this bank's ICGR?A) 6.6 percentB) 3.96 percentC) 7.2 percentD) .33 percentE) None of the aboveAnswer: B（25）A bank has $200 million in assets in the 0 percent risk-weight category. It has $400 million in assets in the 20 percent risk-weight category. It has $1000 million in assets in the 50 percent risk-weight category and has $1000 million in assets in the 100 percent risk-weight category. This bank has $96 million in Tier 1 capital and $48 million in Tier 2 capital. What is this bank's ratio of Tier 1 capital to risk assets?A) 6.08 percentB) 3.04 percentC) 9.11 percentD) 5.54 percentE) None of the aboveAnswer: A3、Short Answer(1) The term bank has been applied broadly over the years to include a diverse set of financial-service institutions, which offer different financial service packages. Identify as many of the different kinds of “banks” as you can. How do the“banks” you have identified compare to the largest banking group of all –the commercial banks? Why do you think so many different financial firms have been called banks? How might this terminological confusion affect financial-service customers?The general public tends to classify anything as a bank that offers some sort of financial service, especially deposit and loan services. Other institutions that are often referred to as a bank without being one are savings associations, credit unions, money market funds, mutual funds, hedge funds, security brokers and dealers, investment banks, finance companies, financial holding companies and life and property/casualty insurance companies. All of these institutions offer some of the services that a commercial bank offers, but generally not the entire scope of services. Since providers of financial services are normally called banks by the general public they are able to take away business from traditional banks and it is of utmost importance for commercial banks to clarify their unique position among financial services providers.(2) What is monetary policy?Monetary policy consists of regulation and control over the growth of money and credit in an attempt to pursue broad economic goals such as full employment,avoidance of inflation, and sustainable economic growth. Its principal tools are open market operations, changes in the discount (lending) rate, and changes in reserve requirements behind deposits.(3) What factors influence the stock price of a financial-services corporation?A bank's stock price is affected by all those factors affecting its profitability and risk exposure, particularly its rate of return on equity capital and risk to shareholder earnings. A bank can raise its stock price by creating an expectation in the minds of investors of greater earnings in the future, by lowering the bank's perceived risk exposure, or by a combination of increases in expected earnings and reduced risk. (4) What makes it so difficult to correctly forecast interest rate changes?Interest rates cannot be set by an individual bank or even by a group of banks; they are determined by thousands of investors trading in the credit markets. Moreover, each market rate of interest has multiple components--the risk-free interest rate plus various risk premium. A change in any of these rate components can cause interest rates to change. To consistently forecast market interest rates correctly would require bankers to correctly anticipate changes in the risk-free interest rate and in all rate components. Another important factor is the timing of the changes. To be able to take full advantage of their predictions, they also need to know when the changes will take place.(6) What is a long hedge in financial futures? A short hedge?A long hedger offsets risk by buying financial futures contracts around the time new deposits are expected, when a loan is to be made, or when securities are added to the bank's portfolio. Later, as deposits and loans approach maturity or securities are sold, a like amount of futures contracts is sold. A short hedger offsets risk by selling futures contracts when the bank is expecting a large cash inflow in the near future. Later, as deposits come flowing in, a like amount of futures contracts is purchased.(7) What advantages do sales of loans have for lending institutions trying to raise funds?Loan sales permit a lending institution to get rid of less desirable or lower-yielding loans and allow them to raise additional funds. In addition, replacing loans that are sold with marketable securities can increase the liquidity of the lending institution.(8) What is a credit swap? For what kinds of situations was it developed?A credit swap is where two lenders agree to swap portions of the ir customer’s loan repayments. It was developed so that banks do not have to rely on one narrow market area. They can spread out the risk in the portfolio over a larger market area.(9) What kinds of assets are most amenable to the securitization process?The best types of assets to pool are high quality, fairly uniform loans, such as home mortgages or credit card receivables.(10) What are the principal sources from which the supply of liquidity comes?Supplies of funds stem principally from incoming deposits, sales of bank assets, particularly money market securities, and repayments of outstanding loans. Liquidity also comes from the sale of nondeposit services and borrowings from the money market(11) Which deposits are the least costly for depository institutions? The most costly?Commercial checkable deposits, particularly regular noninterest bearing demand deposits, are usually the least costly. The most costly deposits are passbook savings accounts having substantial deposit and withdrawal activity and higher interest-rate time deposits.(12) What are the most significant differences between Basel I and Basel II? Explain the importance of the concepts of internal risk assessment, V AR, and market disciplineBasel I used a one size fits all a pproach to determine a bank’s capital requirements. Basel II recognizes that different banks have different risk exposures and should be subject to different capital requirements. It also broadens the types of risk considered for determining capital requirements, including credit, market and operational risk. Internal risk assessment refers to an innovation in Basel II which allows banks to measure their own risk exposure. These measurements are subject to review by the regulators to ensure that they are reasonable. The V AR model is one of the models used to determine a bank’s risk exposure. It measures the price or market risk of a portfolio of assets whose value may decline due to adverse movements in the financial markets or interest rates. Market discipline refers to the market determining the bank’s risk exposure. In order to achieve that a bank would be required to issue subordinated debt. Since this debt is not guaranteed the buyers of these notes would be very vigilant about the issuing bank’s financial condition.4、Calculation(1) Suppose a bank has an allowance for loan losses of $1.25 million at the beginning of the year, charges current income for a $250,000 provision for loan losses, charges off worthless loans of $150,000, and recovers $50,000 on loans previously charged off. What will be the balance in the bank's allowance for loan losses at year-end?The balance in the allowance for loan loss (ALL) account at year end will be:Beginning ALL = $1.25 millionPlus: Annual Provisionfor Loan Losses = +0.25Recoveries onLoans Previously = +0.05Charged OffMinus: ChargeOffs of Worthless = -0.15LoansEnding ALL = $1.40 million(2) Suppose a bank has an ROA of 0.80 percent and an equity multiplier of 12x. What is its ROE? Suppose this bank's ROA falls to 0.60 percent. What size equity multiplier must it have to hold its ROE unchanged?The bank's ROE is:ROE = 0.80 percent *12 = 9.60 percent.If ROA falls to 0.60 percent, the bank's ROE and equity multiplier can be determined from:ROE = 9.60% = 0.60 percent * Equity MultiplierEquity Multiplier = 9.60 percent = 16x.0.60 percent(3) Suppose that a thrift institution has an average asset duration of 2.5 years and an average liability duration of 3.0 years. If the bank holds total assets of $560 million and total liabilities of $467 million, does it have a significant duration gap? If interest rates rise, what will happen to the value of the bank's net worth?Duration Gap = D A – D L * Assets s Liabilitie = 2.5 yrs. – 3.0 yrs. ⎪⎭⎫ ⎝⎛million $560million $467 = 2.5 years – 2.5018 years= -0.018 yearsThis bank has a very slight negative duration gap; so small in fact that we could consider it insignificant. If interest rates rise, the bank's liabilities will fall slightly more in value than its assets, resulting in a small increase in net worth.(4) A bank plans to borrow $55 million in the money market at a current interest rate of 4.5 percent. However, the borrowing rate will float with market conditions. To protect itself the bank has purchased an interest-rate cap of 5 percent to cover this borrowing. If money market interest rates on these funds suddenly climb to 5.5 percent as the borrowing begins, how much in total interest will the bank owe andhow much of an interest rebate will it receive assuming the borrowing is only for one month?Total Amount Interest Number of Months Interest Owed = Borrowed * Rate Charged * 12= $55 million x 0..055 x 112= $0.527 million or $252,083.33.How much of an interest rebate will the bank receive for its one-month borrowing?[]12MonthsofNumberxBorrowedAmt.xRateCap-RateInterestMarketRebateInterest == (.055 - .05) x $55 million x 112= $22,916.67.(5) Suppose a corporate bond an investment officer would like to purchase for her bank has a before-tax yield of 8.98 percent and the bank is in the 35 percent federal income tax bracket. What is the bond's after-tax gross yield? What after tax rate of return must a prospective loan generate to be competitive with the corporate bond? Does a loan have some advantages for a lending institution that a corporate bond would not have?After-tax Gross Yield on Corporate Bond = 8.98 %( 1 - 0.35) = 5.84%.A prospective loan must generate a comparable yield to that of the bond to be competitive. However, granting a loan to a corporation may have the added advantage of bringing in additional service business for the bank that merely purchasing a corporate bond would not do. In this case the bank would accept a somewhat lower yield on the loan compared to the bond in anticipation of getting more total revenue from the loan relationship due to the sale of other bank services. (6) Suppose that a thrift institution’s liquidity division estimates that it holds $19 million in hot money deposits and other IOUs against which it will hold an 80 percent liquidity reserve, $54 million in vulnerable funds against which it plans to hold a 25 percent reserve, and $112 million in stable or core funds against which it will hold a 5 percent liquidity reserve. The thrift expects its loans to grow 8 percent annually; its。