Which of the following has caused banks difficulty in estimating liquidity needs? A. competition for loans from other financial institutions B. deregulation of interest rate ceilings on deposits C. competition for loans from nonfinancial institutions D. a, b, and c

When both deposit and loan interest rates increase at the same speed in the market, a bank tends to (      ) to make profit.   a. reinvest  b. refinance   c. keep neutral

b) Why is the risk-adjusted return on capital (RAROC) an important tool in credit risk management for commercial banks?

D3 These statements are True or False? Please explain. 1. The role performed by banks in which thay stand behind their customers when those customers are unable to pay a debt obligation is known as the discounting valuable paper role. 2. Collaterals should be considered as the primary resource to pay off the loans

Why is liquidity risk inherent to the business of banking? How can a bank seek to minimize its liquidity risk?

How do creditors assess risk when lending funds to a company? a. By establishing covenants in the borrowing agreement b. By monitoring the borrower’s debt-to-equity ratio c. By checking a prospective borrower’s credit rating before lending to it d. All of the above answers are correct.

What are the several components of a deposite institution 's liquidity plan? How can such a plan help a deposite institution reduce liquidity shortages?

Which of the following statements is most correct?   a. When actual inflation exceeds expected inflation, debtors gain at the expense of creditors because they repay their loans with depreciated currency. b. When expected inflation exceeds actual inflation, debtors gain at the expense of creditors because they repay their loans with depreciated currency. c. When actual inflation exceeds expected inflation, creditors gain at the expense of debtors because they repay their loans with devalued currency. d. When actual inflation exceeds expected inflation, debtors and creditors both lose because they repay their loans with depreciated currency.

Nonbank financial institutions do not earn the interest on reserves (IOR) rate. a. True b. False

How should a bank structure its liquid assets portfolio to take advantage of falling interest rates ?    a. The bank should invest in short-term securities to minimise capital loss b. The bank should invest in long term securities to maximise capital gains. c. The bank should borrow at fixed interest rates d. The bank should issue certificate deposits with fixed interest rates. e. The bank should hold cash to maximise its interest income.   Which option is correct