56. The ratio of a bank's interest income from its loans and security investments less interest expenses on debt issued divided by total earning assets measures a bank's:
A) Net operating margin
B) Net return before special transactions
C) Net interest ma
C
57. ROE for a bank is calculated by:
A) Dividing net after-tax income by total equity capital.
B) Dividing total operating revenue less operating expenses by total assets.
C) Deducting total interest expenses from total interest income and dividing by tot
A
58. The difference between such sources of bank income as service charges on deposits and trust-service fees and such sources of bank expenses as salaries and wages and overhead expenses divided by total assets or total earning assets is called the:
Net noninterest margin
59. A bank's ROE equals its ROA times its
Total assets divided by total equity capital
60. The earnings spread for a bank is equal to:
Total interest income divided by total earning assets less total interest-expense divided by total interest-bearing bank liabilities.
61. The so-called employee productivity ratio for a bank is equal to:
Net operating income per full-time-equivalent employee
62. According to the textbook the most profitable banks in the United States in 2007 fell in the asset size range of:
Over $10 billion in total assets
63. A bank's stock price will tend to rise if the:
A) Value of the stream of future stockholder dividends is expected to increase
B) The banking organization's perceived level of risk has fallen
C) Expected dividends increase, while perceived level of risk declines
D) All of the above.
64. The ratio that equals total interest income divided by total earning assets less total interest expense divided by total interest-bearing liabilities is known as the:
Earnings spread
65. What do loans and security investments represent for a bank?
Earning assets
66. The so-called tax-management efficiency ratio consists of:
Net income over pre-tax net operating income
67. The ratio of net loans to total assets is considered to be a measure of what form of risk in banking?
Liquidity risk
68. OE for a bank reflects:
A) How well the assets of the bank are managed
B) The bank's use of leverage
C) How well the bank controls expenses
D) All of the above
69. A ratio that can be used to measure a bank's credit risk would be:
Nonperforming loans/total loans
70. A bank that has a low profit margin most likely:
Is doing a poor job of controlling expenses
71. A bank that has a high asset utilization (AU) ratio most likely:
Is allocating assets to the most productive investments
72. Which of the following would be the best example of a ratio used to examine the cost of one of the bank's liabilities?
Interest on time deposits/ total time deposits
73. Which of the following would be the best example of a ratio used to examine the return of one of the bank's assets?
C) Interest on real estate loans/ total real estate loans
74. Which of the following would be the best example of a ratio used to examine the bank's interest rate risk?
D) Interest sensitive assets/ interest sensitive liabilities
75. A bank expects to pay a dividend next year of $3.45 and also expects dividends to grow at a rate of 7% from now on. If the appropriate discount rate is 15%, what should this bank's stock price be in the market?
$43.13
80. The TRC Bank has a net profit margin of 7.5%, an asset utilization ratio of 18%, an equity multiplier of 20 times. What is this bank's ROA?
1.35 percent
81. The TRC Bank has a net profit margin of 7.5%, an asset utilization ratio of 18%, an equity multiplier of 20 times. What is this bank's ROE?
27.00 percent
82. The Smith-James Bank has an ROE of 17.5%, an asset utilization ratio of 13% and a net profit margin of 9%. What is this bank's ROA?
1.17 percent
83. The Smith-James Bank has an ROE of 17.5%, an asset utilization ratio of 13% and a net profit margin of 9%. What must this bank's equity multiplier be?
14.96 times
85. Which of the following ratios would be a measure of credit risk
Nonperforming Loans/Net Loans
86. Which of the following ratios would be a measure of market risk?
A) Nonperforming Loans/Net Loans
B) Net Loans/Total Assets
C) Interest Sensitive Assets/Interest Sensitive Liabilities
D) Equity Capital/Total Assets
E) None of the above
87. In recent years banks have been __________ profitable than (as) S&Ls and Savings Banks.
A) More
88. Operational risk includes which of the following?
A) Failure of bank's computer system
B) Closure of a bank for three months due to flooding from a major hurricane
C) Embezzlement of funds of a bank by a teller of the bank
D) Closure of a bank for two weeks due to a fire from a lightening strike
E) All o
89. Brian Smith, CEO of Carter National Bank, decides that interest rates are going to fall in the future and as a result buys $100 million in 30 year Treasury Bonds for the bank's security portfolio. Instead, interest rates rise causing the value of thes
D) Strategic risk
90. Chaos State Bank has an old computer system which can go down for weeks at a time, leaving customers unable to access their accounts online. Many customers have left the bank for banks with more reliable computer systems. Which type of risk would this
Operational risk
91. Carson County State Bank has a ratio of equity capital to total assets of 2.5%. The FDIC which regulates this bank has determined that this is not enough equity capital and is making the bank issue new stock in the market. In addition, they are not al
Compliance risk
92. Everett Bank has just learned that there is a disgruntled former employee who has created a blog that is telling everyone that Everett Bank has halved their customer service representatives and so customers have great difficulty getting through to a l
Reputation risk
93. Norman Bank made a loan of $1,000,000 to Jarod LeFevre. Jarod has declared bankruptcy and Norman Bank has just learned that the judge in the case has ruled that Jarod does not have to pay any of the loan back or forfeit any of his assets. Which type o
Legal risk
94. Forrest Fennell is thinking about investing in Capital City Bank. He is examining certain ratios of the bank including the ratio of nonperforming loans to total loans and leases and the provision for loan losses to total loans and leases. What type of
Credit risk
95. Gerald Wilkens is thinking about investing in Tallahassee State Bank. He is examining certain ratios of the bank including the ratio of cash assets and government securities to total assets and purchased funds to total assets. What type of risk is Ger
Liquidity risk
96. Amy Farmer is thinking about investing in the Guthrie National Bank. She is examining certain ratios of the bank including the ratio of the book value of the assets to the market value of the assets and the market value of the bonds held by the bank t
Market risk
97. Paul Smith is thinking about investing in Capital City Bank. He is examining certain ratios of the bank including the ratio of interest sensitive assets to interest sensitive liabilities and uninsured deposits to total deposits. What type of risk is P
Interest rate risk
98. The Garic State Bank of New Orleans was under water for three weeks after Hurricane Katrina hit the state. The lobby is full of mud and other debris. Many of the valuables stored in the bank's safety deposit boxes have been ruined. John Garic, the Pre
Operational risk
110. Which assets are excluded from risk assets?
Plant and Equipment