chapter_5

Chapter 5 Meaning5.1 Meanings of “meaning”1. Meaning: Meaning refers to what a language expresses about the world welive in or any possible or imaginary world.2. Connotation: The additional meaning that a word or phrase has beyond itscentral meaning.3. Denotation: That part of the meanings of a word or phrase that relates itto phenomena in the real world or in a fictional or possible word.4. Different types of meaning (Recognized by Leech, 1974)(1) Conceptual meaning: Logical, cognitive, or denotative content.(2) Associative meaninga. Connotative meaning: What is communicated by virtue of whatlanguage refers to.b. Social meaning: What is communicated of the social circumstancesof language use.c. Affective meaning: What is communicated of the feelings andattitudes of the speaker / writer.d. Reflected meaning: What is communicated through association withanother sense of the same expression.e. Collocative meaning: What is communicated through association withwords which tend to occur in the environment of another word.(3) Thematic meaning: What is communicated by the way in which the messageis organized in terms of order and emphasis.5. The difference between meaning, concept, connotation, and denotationMeaning refers to the association of language symbols with the real world.There are many types of meaning according to different approaches.Concept is the impression of objects in people’s mind.Connotation is the implied meaning, similar to implication.Denotation, like sense, is not directly related with objects, but makes the abstract assumption of the real world.5.2 The referential theory1. The referential theory: The theory of meaning which relates the meaningof a word to the thing it refers to, or stands for, is known as thereferential theory.2. The semantic triangle theoryOgden and Richards presented the classic “Semantic Triangle”as manifested in the following diagram, in which the “symbol”refers to the linguist elements (word, sentence, etc.), the “referent” refers to the object in the world of experience, and the “thought”or “reference”refers to concept or notion. Thusthe symbol of a word signifies “things” by virtue of the “concept,”associated with the form of the word in the mind of the speaker of the language. The concept thus considered is the meaning of the word. The connection (represented witha dotted line) between symbol and referent is made possible only through“concept.”Concept / notionThought / reference----------------------Symbol objectWord stands for realitySignifier referentCode signified5.3 Sense relations5.3.1 SynonymySynonymy is the technical name for the sameness relation.5.3.2 AntonymyAntonymy is the name for oppositeness relation. There are three subtypes: gradable, complementary and converse antonymy.1. Gradable antonymyGradable antonymy is the commonest type of antonymy. They are mainly adjectives, e.g. good / bad, long / short, big / small, etc.2. Complementary antonymyThe members of a pair in complementary antonymy are complementary to each other. That is, they divide up the whole of a semantic filed completely.Not only the assertion of one means the denial of the other, the denialof one also means the assertion of the other, e.g. alive / dead, hit / miss,male / female, boy / girl, etc.3. Converse antonymyConverse antonyms are also called relational opposites. This is a special type of antonymy in that the members of a pair do not constitutea positive-negative opposition. They show the reversal of a relationshipbetween two entities, e.g. buy / sell, parent / child, above / below,etc.5.3.3 HyponymyHyponymy involves us in the notion of meaning inclusion. It is a matter of class membership. That is to say, when x is a kind of y, thelower term x is the hyponym, and the upper term y is the superordinate.Two or more hyponyms of the same one superordinate are calledco-hyponyms, e.g. under flower, there are peony, jasmine, tulip, violet,rose, etc., flower is the superordinate of peony, jasmine,etc., peonyis the hyponym of flower,and peony, jasmine, tulip, violet, rose, etc.are co-hyponyms.5.4 Componential analysisComponential analysis defines the meaning of a lexical element in terms of semantic components. That is, the meaning of a word is not an unanalyzable whole. It may be seen as a complex of different semantic features. There are semantic units smaller than the meaning of a word. E.g.Boy: [+human][-adult][+male]Girl: [+human][-adult][-male]Son: child (x, y) & male (x)Daughter: child (x, y) & -male (x)Take: cause (x, (have (x, y)))Give: cause (x, (-have (x, y)))5.5 Sentence meaning5.5.1 An integrated theory1. Compositionality: A principle for sentence analysis, in which themeaning of a sentence depends on the meanings of the constituentwords and the way they are combine.2. Selection restrictions: Restrictions on the choice of individuallexical units in construction with other units. E.g. the wordbreathe will typically select an animate subject (boy, man, woman,etc.) not an abstract or an inanimate (table, book, etc.). The boywas still breathing. The desk was breathing.5.5.2 Logical semantics1. Prepositional logic / prepositional calculus / sentential calculus:Prepositional logic is the study of the truth conditions forpropositions: how the truth of a composite proposition isdetermined by the truth value of its constituent propositions andthe connections between them.2. Predicate logic / predicate calculus: Predicate logic studies theinternal structure of simple propositions.。

PrinciplesofCorporateFinance英⽂第⼗版习题解答Chap005CHAPTER 5Net Present Value and Other Investment CriteriaAnswers to Problem Sets1. a. A = 3 years, B = 2 years, C = 3 yearsb. Bc. A, B, and Cd. B and C (NPV B = $3,378; NPV C = $2,405)e. Truef. It will accept no negative-NPV projects but will turn down some withpositive NPVs. A project can have positive NPV if all future cash flows areconsidered but still do not meet the stated cutoff period.2. Given the cash flows C0, C1, . . . , C T, IRR is defined by:It is calculated by trial and error, by financial calculators, or by spreadsheetprograms.3. a. $15,750; $4,250; $0b. 100%.4. No (you are effectively “borrowing” at a rate of interest highe r than theopportunity cost of capital).5. a. Twob. -50% and +50%c. Yes, NPV = +14.6.6. The incremental flows from investing in Alpha rather than Beta are -200,000;+110,000; and 121,000. The IRR on the incremental cash flow is 10% (i.e., -200 + 110/1.10 + 121/1.102 = 0). The IRR on Beta exceeds the cost of capital and so does the IRR on the incremental investment in Alpha. Choose Alpha.7. 1, 2, 4, and 68. a. $90.91.10)(1$10001000NP V A -=+-=$$4,044.7310)(1.$1000(1.10)$1000(1.10)$4000(1.10)$1000(1.10)$10002000NP V 5432B +=+++++-=$$39.4710)(1.$1000.10)(1$1000(1.10)$1000(1.10)$10003000NP V 542C +=++++-=$ b.Payback A = 1 year Payback B = 2 years Payback C = 4 years c. A and Bd.$909.09.10)(1$1000P V 1A ==The present value of the cash inflows for Project A never recovers the initial outlay for the project, which is always the case for a negative NPV project. The present values of the cash inflows for Project B are shown in the third row of the table below, and the cumulative net present values are shown in the fourth row:C 0 C 1C 2C 3C 4C 5-2,000.00 +1,000.00 +1,000.00 +4,000.00 +1,000.00 +1,000.00-2,000.00909.09 826.45 3,005.26 683.01 620.92-1,090.91 -264.46 2,740.803,423.81 4,044.73Since the cumulative NPV turns positive between year two and year three,the discounted payback period is:years 2.093,005.26264.462=+The present values of the cash inflows for Project C are shown in the third row of the table below, and the cumulative net present values are shown in the fourth row:C 0C 1C 2C 3 C 4C 5-3,000.00 +1,000.00 +1,000.00 0.00 +1,000.00 +1,000.00-3,000.00 909.09 826.450.00 683.01 620.92 -2,090.91 -1,264.46-1,264.46-581.45 39.47Since the cumulative NPV turns positive between year four and year five,the discounted payback period is:years 4.94620.92581.454=+e. Using the discounted payback period rule with a cutoff of three years, the firm would accept only Project B.9. a.When using the IRR rule, the firm must still compare the IRR with the opportunity cost of capital. Thus, even with the IRR method, one must specify the appropriate discount rate.b.Risky cash flows should be discounted at a higher rate than the rate used to discount less risky cash flows. Using the payback rule is equivalent to using the NPV rule with a zero discount rate for cash flows before the payback period and an infinite discount rate for cash flows thereafter. 10.The two IRRs for this project are (approximately): –17.44% and 45.27% Between these two discount rates, the NPV is positive. 11.a.The figure on the next page was drawn from the following points: Discount Rate0% 10% 20%NPV A +20.00 +4.13 -8.33 NPV B +40.00 +5.18 -18.98b.From the graph, we can estimate the IRR of each project from the point where its line crosses the horizontal axis:IRR A = 13.1% and IRR B = 11.9%c. The company should accept Project A if its NPV is positive and higherthan that of Project B; that is, the company should accept Project A if thediscount rate is greater than 10.7% (the intersection of NPV A and NPV B on the graph below) and less than 13.1%.d. The cash flows for (B – A) are:C0 = $ 0C1 = –$60C2 = –$60C3 = +$140Therefore:Discount Rate0% 10% 20%NPV B-A +20.00 +1.05 -10.65IRR B-A = 10.7%The company should accept Project A if the discount rate is greater than10.7% and less than 13.1%. As shown in the graph, for these discountrates, the IRR for the incremental investment is less than the opportunitycost of capital.12. a.Because Project A requires a larger capital outlay, it is possible that Project A has both a lower IRR and a higher NPV than Project B. (In fact, NPV A is greater than NPV B for all discount rates less than 10 percent.) Because the goal is to maximize shareholder wealth, NPV is the correct criterion.b.To use the IRR criterion for mutually exclusive projects, calculate the IRR for the incremental cash flows:C 0C 1C 2IRRA -B -200 +110 +121 10%Because the IRR for the incremental cash flows exceeds the cost of capital, the additional investment in A is worthwhile. c.81.86$(1.09)$3001.09$250400NPV 2A =++-=$ $79.10(1.09)$1791.09$140200NPV 2B =++-=$ 13.Use incremental analysis:C 1C 2 C 3Current arrangement -250,000 -250,000 +650,000 Extra shift -550,000 +650,000 0 Incremental flows -300,000+900,000 -650,000The IRRs for the incremental flows are (approximately): 21.13% and 78.87% If the cost of capital is between these rates, Titanic should work the extra shift.14. a..82010,0008,18210,000)( 1.1020,00010,000PI D ==--+-=.59020,00011,81820,000)( 1.1035,00020,000PI E ==--+-=b.Each project has a Profitability Index greater than zero, and so both areacceptable projects. In order to choose between these projects, we must use incremental analysis. For the incremental cash flows:0.3610,0003,63610,000)( 1.1015,00010,000PI D E ==--+-=-The increment is thus an acceptable project, and so the larger project should be accepted, i.e., accept Project E. (Note that, in this case, the better project has the lower profitability index.)15.Using the fact that Profitability Index = (Net Present Value/Investment), we find:Project Profitability Index 1 0.22 2 -0.02 3 0.17 4 0.14 5 0.07 6 0.18 70.12Thus, given the budget of $1 million, the best the company can do is to acceptProjects 1, 3, 4, and 6.If the company accepted all positive NPV projects, the market value (compared to the market value under the budget limitation) would increase by the NPV of Project 5 plus the NPV of Project 7: $7,000 + $48,000 = $55,000Thus, the budget limit costs the company $55,000 in terms of its market value. 16.The IRR is the discount rate which, when applied to a project’s cash flows, yields NPV = 0. Thus, it does not represent an opportunity cost. However, if eachproject’s cash flows could be invested at that project’s IRR, then the NPV of each project would be zero because the IRR would then be the opportunity cost of capital for each project. The discount rate used in an NPV calculation is the opportunity cost of capital. Therefore, it is true that the NPV rule does assume that cash flows are reinvested at the opportunity cost of capital.17.a.C 0 = –3,000 C 0 = –3,000 C 1 = +3,500 C 1 = +3,500 C 2 = +4,000 C 2 + PV(C 3) = +4,000 – 3,571.43 = 428.57 C 3 = –4,000 MIRR = 27.84%b.2321 1.12C 1.12xC xC -=+(1.122)(xC 1) + (1.12)(xC 2) = –C 3 (x)[(1.122)(C 1) + (1.12C 2)] = –C 3)()21231.12C )(C (1.12C -x +=0.4501.12)(4,00)(3,500(1.124,000x 2=+=)()0IRR)(1x)C -(1IRR)(1x)C -(1C 2210=++++0IRR)(10)0.45)(4,00-(1IRR)(10)0.45)(3,50-(13,0002=++++- Now, find MIRR using either trial and error or the IRR function (on afinancial calculator or Excel). We find that MIRR = 23.53%.It is not clear that either of these modified IRRs is at all meaningful.Rather, these calculations seem to highlight the fact that MIRR really has no economic meaning.18.Maximize: NPV = 6,700x W + 9,000x X + 0X Y – 1,500x Z subject to:10,000x W + 0x X + 10,000x Y + 15,000x Z ≤ 20,000 10,000x W + 20,000x X – 5,000x Y – 5,000x Z ≤ 20,000 0x W - 5,000x X– 5,000x Y – 4,000x Z ≤ 20,000 0 ≤ x W ≤ 1 0 ≤ x X ≤ 1 0 ≤ x Z ≤ 1Using Excel Spreadsheet Add-in Linear Programming Module:Optimized NPV = $13,450with x W = 1; x X = 0.75; x Y = 1 and x Z = 0If financing available at t = 0 is $21,000:Optimized NPV = $13,500with x W = 1; x X = (23/30); x Y = 1 and x Z = (2/30)Here, the shadow price for the constraint at t = 0 is $50, the increase in NPV for a $1,000 increase in financing available at t = 0.In this case, the program viewed x Z as a viable choice even though the NPV of Project Z is negative. The reason for this result is that Project Z provides a positive cash flow in periods 1 and 2.If the financing available at t = 1 is $21,000:Optimized NPV = $13,900with x W = 1; x X = 0.8; x Y = 1 and x Z = 0Hence, the shadow price of an additional $1,000 in t =1 financing is $450.。

Chapter 5 We can do it! 我们会做！1，What can the children do on Fun Day?‘兴趣日或活动日’孩子们会玩什么？对话(1)Mary: I can swim. 玛丽：我会游泳。

Ken: I can’t read. 肯：我不会阅读。

Tom: Can you skip? 汤姆：你会跳绳吗？Charlie: Yes, I can. 查理：会，我会Sally: Can you climb? 莎莉：你能爬（高）吗？Peter: No, I can’t.彼得：不，我不能。

Wordsskip跳跃skip a rope 跳绳read阅读read a book 看书climb攀爬climb a tree 爬树swim游泳swim in the pool 在泳池里游泳draw画画draw a picture 画一幅画write写字write a story 写故事Phonics C c ar c ome Phonics K K ate k ite2 What can the animals do?Read and find out动物们能做什么？阅读并找出。

（1）Today is Sports Day今天是体育会Kelly can run fast. 凯莉跑得很快She can jump high too. 她也能跳得很高Ricky cannot run. Ricky跑不动了( cannot= can’t )He can only walk. 他只能走了He is sad. 他很伤心(2)Can you run fast ,Coco? 你能跑得快吗，Coco ？No, I can’t.不，我不能（3）We can’t run in the race but we can help.我们不能在比赛中跑，但我们可以帮忙。

Thank you. 谢谢（4）I can’t find Coco 我找不到CocoOh no! I am late! 不，我迟到了！（5）Run, Coco,run! 奔跑Coco 奔跑！（6）Well done, Coco！干得好Coco!I can run fast! 我跑得很快！3Tom meets Kate and her sister Mimi in the children’s centre. Mimi is clever.汤姆在儿童中心遇见了凯特和她的妹妹Mimi。

Chapter 5The Financial Statements of Banks and Their Principal CompetitorsFill in the Blank Questions1.Fed funds purchased is an example of _______________________ along with Eurodollarborrowings.Answer: nondeposit borrowings2.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 reserves3.__________________________ is a noncash expense on the bank's income statement whichallows the bank to account for future bad loans.Answer: Provision for loan losses4.__________________________ is the difference between interest income and interest expensesfor a financial institution.Answer: Net interest income5.__________________________ are the primary long term liabilities of the bank. Theseliabilities are paid only after deposits have been paid in the event of bankruptcy.Answer: Subordinated notes and debentures6.A(n)__________________________ is where the financial institution agrees to guaranteerepayment of a customer's loan received from a third party.Answer: standby credit agreement7.A(n)__________________________ is a short term collateralized loan. The collateral that isused generally consists of T-Bills.Answer: repurchase agreement8.A(n)__________________________ is a deposit account which pays an interest rate competitivewith money market mutual funds and which generally has limited check writing ability.Answer: money market deposit account9._____________________ is the sum of all outstanding IOU's owed to the bank in the form ofconsumer, real estate, commercial and agriculture loans as well as other types of creditextensions.Answer: gross loans10. A financial institution often records the value of its assets and liabilities at _______________which is the original or historical cost of the asset.Answer: book value11.The principal types of__________________________ include fee income, income from fiduciaryactivities and services charges on deposits.Answer: noninterest income12.The__________________________ shows the amount of revenues received and expensesincurred over a specific time period.Answer: Report of Income (income statement)13.The__________________________ lists the assets, liabilities and equity capital held by the bankon a given date.Answer: Report of Condition (balance sheet)14.______________ is labeled "Accounting for Derivative Instruments and Hedging Activities."Answer: FASB 13315.________________ labeled “Accounting for Derivative Instruments and Hedging Activities” andits recent amendments, FASB 138, are designed to make derivatives more publicly visible on corporate financial statements.Answer: FASB 13316.Under _____________ banks must account for the expected loss of interest income onnonperforming loans when calculating their loan-loss provision.Answer: FASB 11417.Temporarily buying and selling securities by a securities firm in a thinly traded market so as toinfluence the price is known as _________________.Answer: painting the tape18.The activity of manipulating the financial statements to artificially enhance the banks financialstrength is known as ___________________.Answer: window dressing or ‘creative accounting’19. is direct and indirect investment in real estate. These areproperties obtained for compensations for nonperforming loans.Answer: Other Real Estate Owned (OREO)20. consists of interest income received on loans from customers thathas not yet been earned by the bank under accrual accounting methods.Answer: Unearned discount income21. can be held by individuals and nonprofit institutions, bear interest andpermit drafts from being written against the account to pay third parties.Answer: Now accounts22.In the worldwide banking system, represent transferable time depositsin a variety of currencies and are often the principal source of short term borrows by banks.Answer: Eurocurrency Borrowings23.One part of arises from fees charged for ATM and POS transactions.Answer: Other Noninterest Income24.Fees that arise from a financial firm’s trust activities, fees for managing a corporations’ interestand dividend payments and fees for managing corporate or individual retirement plans are allincluded in the category of fees arising from .Answer: fiduciary activities25.Checking account maintenance fees and overdraft fees are included in the noninterest incomeaccount under .Answer: service charges on deposit accountsTrue/False QuestionsT F26.On a bank's income statement (Report of Income) deposit costs are financial inputs.Answer: TrueT F27.Loans and leases are financial outputs on a financial institution's balance sheet or Report of Condition.Answer: TrueT F28.Nondeposit borrowings are a financial input on a bank's balance sheet or Report of Condition.Answer: TrueT F29.The cost of nondeposit borrowings is a financial input on a bank's income statement or Report of Income.Answer: TrueT F30.Securities income is a financial output listed on a financial institution's Report of Condition.Answer: FalseT loans on a bank's balance sheet are derived by deducting the allowance for loan losses and unearned discounts from gross loans.Answer: TrueT F32.When a loan is classified as nonperforming any accrued interest recorded on the bank's books, but not actually received, must be deducted from a bank's loan revenues.Answer: TrueT F33.In U.S. banking, securities gains are treated as ordinary income.Answer: TrueT F34.Most banks report securities gains as a component of their total noninterest income.Answer: FalseT F35. A bank displaying trading account securities on its balance sheet is serving as a security dealer and plans to sell those securities before they reach maturity.Answer: TrueT F36.Bad loans normally do not affect a bank's current income.Answer: TrueT F37.The expensing of a worthless loan usually must occur in the year that loan become worthless.Answer: TrueT F38.Recoveries on loans previously charged off are added to the Provision for Loan Losses (PLL) account on a bank's income statement.Answer: FalseT F39.Loan-loss reserves set aside to cover a particular loan or loans expected to be a problem or present the bank with above-average risk are known as specific reserves.Answer: TrueT F40.U.S. banks (especially those with $500 million or more in total assets) are required to file financial statements audited by an independent public accountant with their principalfederal regulatory agency.Answer: TrueT F41.Off-balance-sheet items for a bank are fee generating transactions which are not recorded on their balance sheet.Answer: TrueT F42.The experience method of accounting for future loan loss reserves allows a bank to deduct from their income statement up to .6 percent of their eligible loans.Answer: FalseT F43.After the Tax Reform Act of 1986, large banks (>$500 million in assets) were required to use the reserve method of accounting for future loan loss reserves.Answer: FalseT F44.The number one source of revenue for a bank based on dollar volume is loan income.Answer: TrueT F45.In looking at comparative balance sheets, it can be seen that large banks rely more heavily on nondeposit borrowings while small banks rely more heavily on deposits.Answer: TrueT F46.The Pension Fund industry is now larger than the Mutual Fund industry.Answer: FalseT F47.Off-balance-sheet items for banks have declined in recent years.Answer: FalseT F48.Except for banks, Savings & Loans and Savings Banks hold the most deposits.Answer: TrueT F49."Painting the tape" refers to the practice whereby banks understate their nonperforming loans.Answer: FalseT F50.Financial statements issued by banks and nonblank financial service firms are looking increasingly similar today.Answer: TrueMultiple Choice Questions51.Bank assets fall into each of the following categories except:A)Loans.B)Investment securities.C)Demand deposits.D)Noninterest cash and due from banks.E)Other assets.Answer: C52.Banks generate their largest portion of income from:A)Loans.B)Short-term investment.C)Demand deposits.D)Long-term investments.E)Certificates of deposit.Answer: A53.Loans typically fall into each of the following categories except:A)Real estate.B)Consumer.C)Commercial and Industrial (business).D)Agricultural.E)Municipal.Answer: E54.Which of the following adjustments are made to gross loans and leases to obtain net loans andleases?A)The loan and lease loss allowance is subtracted from gross loansB)Unearned income is subtracted from gross interest receivedC)Investment income is added to gross interest receivedD) A and B.E) A. and C.Answer: D55.An example of a contra-asset account is:A)The loan and lease loss allowance.B)Unearned income.C)Buildings and equipment.D)Revenue bonds.E)The provision for loan loss.Answer: A56.The noncash expense item on a bank's Report of Income designed to shelter a bank's currentearnings from taxes and to help prepare for bad loans is called:A)Short-term debt interestB)Noninterest expenseC)Provision for taxesD)Provision for possible loan lossesE)None of the above.Answer: D57.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: B58.When a bank serves as a security dealer for certain kinds of securities (mainly federal, state, andlocal government obligations) the value of these securities is usually recorded in what account ona bank's Report of Condition?A)Investment SecuritiesB)Taxable and Tax-Exempt SecuritiesC)Trading Account SecuritiesD)Secondary ReservesE)None of the aboveAnswer: C59.The difference between noninterest income and noninterest expenses on a bank's Report ofIncome is called:A)Net Profit MarginB)Net Interest IncomeC)Net Income After Provision for Possible Loan LossesD)Income or Loss Before Income TaxesE)Net Noninterest IncomeAnswer: E60.The account that is built up by annual noncash expense deductions and is subtracted from GrossLoans on the Report of Condition is:A)Unearned incomeB)Nonperforming loansC)Allocated loan risk deductionsD)Allowance for possible loan lossesE)None of the above.Answer: D61.Nonperforming loans are credits on which any scheduled loan repayments and interest paymentsare past due for more than:A)30 daysB)60 daysC)90 daysD)180 daysE)None of the above.Answer: C62.One-time only transactions that often involve financial assets or real property pledged ascollateral behind a loan and upon which the bank has foreclosed affect a bank's account known as:A)Allowance for loan lossesB)Nonrecurring sales of assetsC)Asset gains or lossesD)Provision for loan and security lossesE)None of the above.Answer: B63.The use of fixed assets, rather than financial assets, in order to increase earnings flowing to abank's stockholders is known as:A)Plant and equipment investmentB)Financial leverageC)Operating leverageD)Nondeposit capitalE)None of the above.Answer: C64.Banks depend heavily upon borrowed funds supplied by customers with little owners' capitalinvested. This means that banks make heavy use of:A)Financial leverageB)Capital restructuringC)Operating LeverageD)Margin borrowingE)None of the above.Answer: A65.When a loan is considered uncollectible, the bank's accounting department will write (charge) itoff the books by reducing the ______ and the accounts. Which choice belowcorrectly fills in the blank in the preceding sentence?A)PLL and Gross LoansB)ALL and Net LoansC)ALL and Gross LoansD)PLL and Net LoansE)None of the above.Answer: C66.The common banking practice of selling those investment securities that have appreciated inorder to reap a capital gain and holding onto those securities whose prices have declined is known as:A)Gains tradingB)Performance bankingC)Loss control tradingD)Selective portfolio managementE)None of the above.Answer: A67.Noninterest revenue sources for a bank are called:A)Commitment fees on loansB)Fee incomeC)Supplemental incomeD)Noninterest marginE)None of the above.Answer: Brge U.S. banks must use which of the methods listed below to determine their provision forloan loss expense?A)Experience methodB)Reserve methodC)Specific charge-off methodD)Historical cost methodE)None of the above.Answer: C69.A bank's temporary lending of excess reserves to other banks is labeled on the balance sheet as:A)Fed Funds PurchasedB)Fed Funds SoldC)Money Market DepositsD)Securities Purchased for ResaleE)None of the aboveAnswer: B70.A bank sells shares of its common stock with a par value of $100 for $200 in the market. Whichtwo accounts on the bank's balance sheet are going to be affected?A)Retained earnings and capital surplus accountsB)Subordinated notes and debentures and commons stock outstanding accountsC)Retained earnings and common stock outstanding accountsD)Common stock outstanding and capital surplus accountsE)Only the common stock outstanding account is affectedAnswer: D71.A type of letter of credit which is widely used in international trade is known as:A)Banker's acceptanceB)Commercial paperC)Repurchase agreementD)Fed funds purchasedE)None of the aboveAnswer: A72.A bank which starts with ALL of $1.48 million at the beginning of the year, charges off worthlessloans of $.94 million during the year, recovers $.12 million on loans previously charged off and charges current income for a $1.02 million provision for loan losses will have an ALL at the end of the year of:A)$.66 millionB)$3.32 millionC)$1.68 millionD)$1.28 millionE)The same amount as at the beginning of the yearAnswer: C73.A bank that has total interest income of $67 million and total noninterest income of $14 million.This bank has total interest expenses of $35 million and total noninterest expenses (excluding PLL) of $28 million. Its provision for loan losses is $6 million and its taxes are $5. What is this bank's net interest income?A)$7B)-$14C)$18D)$32E)None of the aboveAnswer: D74.A bank that has total interest income of $67 million and total noninterest income of $14 million.This bank has total interest expenses of $35 million and total noninterest expenses (excluding PLL) of $28 million. Its provision for loan losses is $6 million and its taxes are $5. What is this bank's net noninterest income?A)$7B)-$14C)$18D)$32E)None of the aboveAnswer: B75.A bank that has total interest income of $67 million and total noninterest income of $14 million.This bank has total interest expenses of $35 million and total noninterest expenses (excluding PLL) of $28 million. Its provision for loan losses is $6 million and its taxes are $5. What is this bank's net income?A)$7C)$18D)$32E)None of the aboveAnswer: A76.Which of the following financial statements shows the revenues and expense of a bank over a setperiod of time?A)The statement of stockholders equityB)The funds-flow statementC)The report of financial conditionD)The report of incomeE)None of the aboveAnswer: D77.Which of the following accounts is sometimes called the bank's primary reserves?A)Cash and deposits due from bankB)Investment securitiesC)Trading account securitiesD)Fed funds soldE)None of the aboveAnswer: A78.Which of the following assets is the largest asset item on the bank's balance sheet?A)SecuritiesB)CashC)LoansD)Bank PremisesE)None of the aboveAnswer: C79.What financial service industry category is second to the banking industry in total assets held:A)Mutual fundsB)ThriftsC)Investment banksD)Insurance companiesE)Pension fundsAnswer: A80.FASB Rule 115 focuses primarily on bank:A)Deposit sourcesB)Investments in marketable securitiesC)Derivatives tradingD)Loan-loss reservesE)Federal funds81.Which of the following most accurately describes the principal type(s) of bank noninterestincome:A)Fees from fiduciary transactionsB)Fees from deposit transactionsC)Fees from securities transactionsD)Fees from additional noninterest incomeE)All of the aboveAnswer: E82.Fee income arising from fiduciary transactions include all of the following except:A)Checking account maintenance feesB)Fees for managing and protecting a customer’s propertyC)Fees for recordkeeping for corporate securityD)Fees for dispersing interest and dividend payments for a corporationE)Fees for managing corporate and individual retirement plansAnswer: A83.You know the following information about the Miller State Bank:Gross Loans$300Miscellaneous Assets$50Deposits$390Total Equity$50Common Stock Par$5Non-Deposit Borrowings$60Investment Securities$150Net Premises$40Surplus$5Allowance for Loan Losses$50Deposits$390Total Assets$500Gross Premises $70Given this information, what is this firm’s Net Loans?A) $250B) $350C) $500D) $50E) $150Answer: A84.You know the following information about the Miller State BankGross Loans$300Miscellaneous Assets$50Deposits$390Total Equity$50Common Stock Par$5Non-Deposit Borrowings$60Investment Securities$150Net Premises$40Surplus$5Allowance for Loan Losses$50Deposits$390Total Assets$500Gross Premises $70Given this information, what is this firm’s Depreciation?A) $250B) $30C) $70D) $40E) $110Answer: B85.You know the following information about the Miller State BankGross Loans$300Miscellaneous Assets$50Deposits$390Total Equity$50Common Stock Par$5Non-Deposit Borrowings$60Investment Securities$150Net Premises$40Surplus$5Allowance for Loan Losses$50Deposits$390Total Assets$500Gross Premises $70Given this information, what is this firm’s Total Liabilities?A) $390B) $60C) $450D) $500E) $50Answer: C86.You know the following information about the Miller State BankGross Loans$300Miscellaneous Assets$50Deposits$390Total Equity$50Common Stock Par$5Non-Deposit Borrowings$60Investment Securities$150Net Premises$40Surplus$5Allowance for Loan Losses$50Deposits$390Total Assets$500Gross Premises $70Given this information, what is this firm’s Undivided Profits?A) $50B) $5C) $10D) $40E) $450Answer: D87.You know the following information about the Miller State BankGross Loans$300Miscellaneous Assets$50Deposits$390Total Equity$50Common Stock Par$5Non-Deposit Borrowings$60Investment Securities$150Net Premises$40Surplus$5Allowance for Loan Losses$50Deposits$390Total Assets$500Gross Premises $70Given this information, what is this firm’s Total Liabilities Plus Equity?A) $250B) $450C) $150D) $50E) $500Answer: E88.You know the following information about the Davis National BankTotal Interest Expenses($500)Total Non Interest Income $100Securities Gains (Losses) $ 50Income Taxes($ 80)Dividends to Stockholders($ 40)Total Interest Income $800Total Non Interest Expenses($150)Provision for Loan Losses($100)Given this information, what is this firm’s Net Interest Income?A) $300B) $150C) ($50)D) $120E) $80Answer: A89.You know the following information about the Davis National BankTotal Interest Expenses($500)Total Non Interest Income $100Securities Gains (Losses) $ 50Income Taxes($ 80)Dividends to Stockholders($ 40)Total Interest Income $800Total Non Interest Expenses($150)Provision for Loan Losses($100)Given this information, what is this firm’s Net Non Interest Income?A) $300B) $150C) ($50)D) $120E) $80Answer: C90.You know the following information about the Davis National BankTotal Interest Expenses($500)Total Non Interest Income $100Securities Gains (Losses) $ 50Income Taxes($ 80)Dividends to Stockholders($ 40)Total Interest Income $800Total Non Interest Expenses($150)Provision for Loan Losses($100)Given this information, what is this firm’s Pretax Net Operating Income (or Net Income before Extraordinary Items)?A) $300B) $150C) ($50)D) $120E) $80Answer: B91.You know the following information about the Davis National BankTotal Interest Expenses($500)Total Non Interest Income $100Securities Gains (Losses) $ 50Income Taxes($ 80)Dividends to Stockholders($ 40)Total Interest Income $800Total Non Interest Expenses($150)Provision for Loan Losses($100)Given this information, what is this firm’s Net Income?A) $300B) $150C) ($50)D) $120E) $80Answer: D92.You know the following information about the Davis National BankTotal Interest Expenses($500)Total Non Interest Income $100Securities Gains (Losses) $ 50Income Taxes($ 80)Dividends to Stockholders($ 40)Total Interest Income $800Total Non Interest Expenses($150)Provision for Loan Losses($100)Given this information, what is this firm’s Increase in Undivided Profits?A) $300B) $150C) ($50)D) $120E) $80Answer: E93.You know the following information about the Davis National BankTotal Interest Expenses($500)Total Non Interest Income $100Securities Gains (Losses) $ 50Income Taxes($ 80)Dividends to Stockholders($ 40)Total Interest Income $800Total Non Interest Expenses($150)Provision for Loan Losses($100)Given this information, what is this firm’s Total Revenues?A) $800C) $150D) $950Answer: D94.You know the following information about the Webb State BankAccumulated Depreciation$40Net Loans$600Fed Funds Purchased and Repurchase Agreements$200Cash and Due from Banks$50Trading Account Securities$40Miscellaneous Assets$100Deposits$500Undivided Profits$140Gross Premises$90Surplus$40Subordinated Debt$100Investment Securities$160Common Stock Par$20Gross Loans$700 Given this information, what is this firm’s Allowance for Loan Losses?A) $1300B) $1000C) $50D) $200E) $100Answer: E95.You know the following information about the Webb State BankAccumulated Depreciation$40Net Loans$600Fed Funds Purchased and Repurchase Agreements$200Cash and Due from Banks$50Trading Account Securities$40Miscellaneous Assets$100Deposits$500Undivided Profits$140Gross Premises$90Surplus$40Subordinated Debt$100Investment Securities$160Common Stock Par$20Gross Loans$700 Given this information, what is this firm’s Net Premises?A) $130B) $1000D) $200E) $100Answer: C96.You know the following information about the Webb State BankAccumulated Depreciation$40Net Loans$600Fed Funds Purchased and Repurchase Agreements$200Cash and Due from Banks$50Trading Account Securities$40Miscellaneous Assets$100Deposits$500Undivided Profits$140Gross Premises$90Surplus$40Subordinated Debt$100Investment Securities$160Common Stock Par$20Gross Loans$700 Given this information, what is this firm’s Total Non Deposit Borrowings?A) $1000B) $300C) $800D) $200E) $500Answer: B97.You know the following information about the Webb State BankAccumulated Depreciation$40Net Loans$600Fed Funds Purchased and Repurchase Agreements$200Cash and Due from Banks$50Trading Account Securities$40Miscellaneous Assets$100Deposits$500Undivided Profits$140Gross Premises$90Surplus$40Subordinated Debt$100Investment Securities$160Common Stock Par$20Gross Loans$700 Given this information, what is this firm’s Total Liabilities?A) $1000B) $300D) $200E) $500Answer: C98.You know the following information about the Webb State BankAccumulated Depreciation$40Net Loans$600Fed Funds Purchased and Repurchase Agreements$200Cash and Due from Banks$50Trading Account Securities$40Miscellaneous Assets$100Deposits$500Undivided Profits$140Gross Premises$90Surplus$40Subordinated Debt$100Investment Securities$160Common Stock Par$20Gross Loans$700 Given this information, what is this firm’s Total Equity?A) $1000B) $300C) $800D) $200E) $500Answer: D99.You know the following information about the Webb State BankAccumulated Depreciation$40Net Loans$600Fed Funds Purchased and Repurchase Agreements$200Cash and Due from Banks$50Trading Account Securities$40Miscellaneous Assets$100Deposits$500Undivided Profits$140Gross Premises$90Surplus$40Subordinated Debt$100Investment Securities$160Common Stock Par$20Gross Loans$700 Given this information, what is this firm’s Total Assets?A) $1000B) $300C) $800E) $500Answer: A100.You know the following information about the Taylor National Bank Provision for Loan Losses($100)Income Taxes($140)Non Interest Income $500Dividends ($60)Securities Gains (Losses) ($50)Interest Income $1500Non Interest Expense $750Interest Expenses $750 Given this information, what is this firm’s Net Interest Income?A) $150B) $210C) $400D) ($250)E) $750Answer: E101.You know the following information about the Taylor National Bank Provision for Loan Losses($100)Income Taxes($140)Non Interest Income $500Dividends ($60)Securities Gains (Losses) ($50)Interest Income $1500Non Interest Expense $750Interest Expenses $750 Given this information, what is this firm’s Net Non Interest Income?A) $150B) $210C) $400D) ($250)E) $750Answer: D102.You know the following information about the Taylor National Bank Provision for Loan Losses($100)Income Taxes($140)Non Interest Income $500Dividends ($60)Securities Gains (Losses) ($50)Interest Income $1500Non Interest Expense $750Interest Expenses $750Given this information, what is this firm’s Net Operating Income or Net Income BeforeExtraordinary Income?A) $150B) $210C) $400D) ($250)E) $750Answer: C103.You know the following information about the Taylor National BankProvision for Loan Losses($100)Income Taxes($140)Non Interest Income $500Dividends ($60)Securities Gains (Losses) ($50)Interest Income $1500Non Interest Expense $750Interest Expenses $750Given this information, what is this firm’s Net Income?A) $150B) $210C) $400D) ($250)E) $750Answer: B104.You know the following information about the Taylor National BankProvision for Loan Losses($100)Income Taxes($140)Non Interest Income $500Dividends ($60)Securities Gains (Losses) ($50)Interest Income $1500Non Interest Expense $750Interest Expenses $750Given this information, what is this firm’s Increase in Undivided Profits?A) $150B) $210C) $400D) ($250)E) $750Answer: ARose/Hudgins, Bank Management and Financial Services, 8/e77。