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Question
If a bank has a positive gap, that is, if it is asset sensitive, the bank can hedge its interest-rate risk by which of the following activities?
A. Reducing maturities of its assets
B. Reducing maturities of its liabilities
C. Using a long hedge
D. All of the options are correct
E. Reducing maturities of its assets and liabilities
Answer
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Related questions
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Which of the following adjustments are made to gross loans and leases to obtain net loans and leases?
A. Loan and lease loss allowance is added to gross loans.
B. Unearned income is subtracted from gross interest received.
C. Investment income is added to gross interest received.
D. Loan and lease loss allowance and unearned income is subtracted from gross loans.
E. Loan and lease loss allowance is subtracted from gross loans and investment income is added to gross interest received.
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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.
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A. more capital than other banks.
B. more aggressive marketing plans than other banks.
C. more employees than other banks.
D. more advanced technology than other banks.
E. All the options are correct.
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A. offering memorandum
B. offering article
C. underwriter's commitment report
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A. two
B. three
C. five
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The Jones State Bank is planning to add a branch office on the west side of Edmond, Oklahoma. The bank has done a survey of local residents near the area where it wants to build the branch office and has discovered that most residents are in their 50's and 60's. Which factor would this address when considering whether to add a new branch?
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C. Average age of the local population
D. Population Density
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Which of the following would not be a telephone service that customers can get from a bank call center?
A. The current balance in their account
B. A fax copy of a loan application to the bank
C. List of what transactions have passed through the account
D. Access to their safety deposit box
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A(n) _________________________ is an agreement between a buyer and a seller today which calls for the delivery of a particular security in exchange for cash at some future date for a set price.
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Maryellen Epplin notices that a particular T-Bill has a banker's discount rate of 9 percent in the Wall Street Journal. She knows that this T-Bill has 20 days to maturity and has a face value of $10,000.
What is the yield to maturity on this T-Bill?
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B. 0.5 percent
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If interest rates on both assets and liabilities decrease by 2 percent in the next 90 days, what should happen to this bank's net interest margin?
A. It should fall by 2 percent.
B. It should fall by 0.6 percent.
C. It should fall by 4 percent.
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Which of the following would be an example of a repriceable asset?
A. Money the bank has borrowed from the money market
B. Cash in the vault
C. Demand deposits that do not pay interest
D. Short-term securities issued by the government about to mature
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Q:
A bank is liability sensitive, if its:
A. deposits and non-deposit borrowings are not affected by changes in interest rates.
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C. interest-sensitive liabilities exceed its interest-sensitive assets.
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The _______________ is determined by the demand and supply for loanable funds in the market.
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A. 100,000 shares
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A. Earnings volatility
B. Reduction of the exchange ratio
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D. Increased risk of bankruptcy
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According to the textbook, the lackadaisical profit performance surrounding a merger may be explained by the:
A. tax inefficiencies due to a merger.
B. lenders cutting off credit lines due to the merger.
C. accounting irregularities when reporting earnings of the combined entity.
D. managerial hubris and sizeable merger premium that acquirers have to pay to shareholders of the acquired firms.
E. All of the options are correct.
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According to the textbook, bank mergers are often motivated by:
A. profit potential.
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C. expected tax benefits.
D. market-positioning strategies.
E. All of the options are correct.
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The merger of Bank of America and Security Pacific in 1992 resulted in an expansion of branch offices for both banks.