Topic 1 DQ 1 ENT

Overdrafts are a result of a.loans made against certificates of deposit b.banks paying wire transfers made during one business day c.banks extending credit beyond the amount specified in a line of credit d.banks paying on checks or wire transfers drawn on uncollected balances.   Loan participations are: a. parts of loans that are sold to banks b. participation in the underwriting c. parts of securitized investments d. downstream investment     Convenience use of credit cards refers to a. the line of credit may be raised as needed b. amounts owed being paid in full when billed c. the open-end use of the card d. none of the above

hich one is not an incentive for a bank to Securitize its mortgage loans? A) Reduce insurance premium paid to FDIC B Meet the regulations on equity capital adequacy Increase the duration of the bank's asset portfolio D Reduce the bank's illiquidity exposure

QUESTION TEN  A bank is an entity that conducts profit-oriented business. Which of the following is the reason why it is difficult for a bank to play its role as social finance? A ) Small and medium-sized enterprises (SMEs) do not have clear business strategies. B ) Small and medium-sized enterprises (SMEs) lack business knowledge, which increases the risk of default loans   C ) Financial portfolio by commercial banks is too complicated for small and medium-sized enterprises (SMEs).     D ) Without a proper financial record, the bank is unable to track the small entrepreneur’s record of paying debts

Financial Risk Management QUESTION 1 : Protecting Interest Income/Revenue• From the banker’s point of view, when the banker quotes a floating interest, in doing so, the banker is passing on the interest rate risk to the borrower.• What if the banker has to quote a fixed interest rate but his cost of funds are floating?In this case, the customer/borrower faces no risk but the banker does.• Example: As a Credit Officer bank you have agreed to provide a customer with a fixedrate, 3-month, RM 20 million loan 90 days from today. You had priced the loan at 12%annual interest rate.• The following quotes are available in the market.3-month KLIBOR = 9 %3-month KLIBOR futures = 90.0 (matures in 90 days)How would you protect yourself from a rise interest rates?

Which one is not an incentive for a bank to securitize its mortgage loans? Reduce insurance premium paid to FDIC Meet the regulations on equity capital adequacy Increase the duration of the bank's asset portfolio Reduce the bank's illiquidity exposure hich one is not an incentive for a bank to Securitize its mortgage loans? A Reduce insurance premium paid to FDIC B Meet the regulations on equity capital adequacy Increase the duration of the bank's asset portfolio Reduce the bank's illiquidity exposure

QUESTION 1 : Protecting Interest Income/Revenue• From the banker’s point of view, when the banker quotes a floating interest, in doing so, the banker is passing on the interest rate risk to the borrower.• What if the banker has to quote a fixed interest rate but his cost of funds are floating?In this case, the customer/borrower faces no risk but the banker does.• Example: As a Credit Officer bank you have agreed to provide a customer with a fixedrate, 3-month, RM 20 million loan 90 days from today. You had priced the loan at 12%annual interest rate.• The following quotes are available in the market.3-month KLIBOR = 9 %3-month KLIBOR futures = 90.0 (matures in 90 days)How would you protect yourself from a rise interest rates?

15. In making loans to a single customer, commercial banks are not restricted to a maximum percentage of their capital, i.e. there is not a limit on how a bank to lend to a single customer. a. True b. False 16. The opening of a commercial bank in the United States a. requires a charter from the city in which they plan to operate requires a charter from a state or the federal government. b. c. None of these is correct d. always requires a charter from the federal government. 17. Current bank regulations: a. set requirements for the maximum amount of equity that banks can hold. b. None of the other answers are correct. c. impose standards for how liquid the bank is. d. involve a trade-off between the safety of the bank and the efficiency of bank operations. 18. The Basel framework recommends that banks maintain capital in proportion to their: a. None of the other answers is correct. b. total assets c. risk-weighted liabilities d. risk-weighted assets 19. The potential risk that financial…

Question 2 Explain the following different types of credit advances and when firms use it. (i) Bank overdraft (ii) Syndicated loan (iii) Factoring b) Discuss the advantages and disadvantages of factoring service to businesses?

A bank is considering implementing a business rules management system for assessing the riskand creditworthiness of individuals as part of the loan approval process.• List and explain 3 benefits of such a system?• List 2 potential legal or ethical issues that might arise in the use of such a system

QUESTION 3 (a) Contrast between overnight policy rate and base lending rate. (b) “In order to enhance the liquidity of a bank, the bank can securitise its assets.”Elaborate the above statement with example.

please help with this question

QUESTION 9 The interest rate charged on secured short-term loans to a corporation is generally higher than that charged on unsecured short-term loans because ... the risk of default is lower on secured loans. secured loans are less risky than unsecured loans. it is costly to negotiate and administer secured loans. lenders of secured loans must pay more for their funds.

Item 33 of 50 The principal advantage of using commercial paper as a short-term financing instrument is that it Select the correct response: Offers security, i.e., collateral, to the lender. Can be purchased without commission costs. Is readily available to almost all companies. Is usually cheaper than a commercial bank loan.

Q 9. What is the benefit of a regulatory guarantee or deposit insurance program for depositors of  commercial banks?  a. It provides preference to those who are first in line to withdraw funds over those last in line. b. It provides incentives to depositors to engage in runs. c. It increases concerns about solvency of a bank. d. It increases concerns about the asset quality of a bank. e. It decreases the likelihood of bank runs.

When a bank grants a consumer loan to someone, it leads to: a. an indirect flow of funds O b. a rise in the bank's liabilities Oc a direct flow of funds Od. a rise in the bank's interest expense

Question one: True or False (Correct the wrong answer)1) Deposits are considered as assets in the bank’s balance sheet2) Credit risk in banks could occur duo to Inadequate income of lenders3) Interest rate on cash credit is higher than interest rate on bank overdraft4) Trading securities is one of the agency functions offered by commercial banks5) Banks accept deposits in order to lend money to the borrowers6) When banks accept deposits, it basically means they are lending money to the depositors7) Cash and treasury management are services provided by commercial banks8) Online banks could face risks linked to rapid technological changes9) Bank regulation’s only objective is to protect the consumer10) International banks have higher transaction costs than regular banks11) Large commercial banks focus on earning fee income on nontraditional activities12) Deposits are considered as liabilities in the bank’s balance sheet13) Banks underwriting loans with the expectation that another party…

14) Commercial banks grant short-term finance to business firms which is known as __________. a. Institutional credit b. Personal credit c. All d. Bank credit

H1.

QUESTION 1 Which if the following is not true of the 5Cs in evaluating credit quality     Character refers to the integrity and honesty of the borrower and applies to both individuals and companies     Capital refers to the savings or wealth of the borrower as an additional source of income to repay the loan     Collateral refers to assets that are pledged to lender     Capacity refer to external factors including the state of economy  that can impact the borrower’s source of income.     QUESTION 2 Which of the following is not true?                                   Firm A                                      Firm B                          Industry Benchmark   2018 2019 2020 2018 2019 2020 2018 2019 2020 ROA 9.14% 9.50% 9.90% 8.11% 8.16% 8.19% 8.11% 8.14% 8.15% ROE 22.45% 22.95% 23.45% 19.65% 19.88% 20.12% 19.95% 20.55% 21.00% TIE 1.75 1.65 1.55 2.75 2.90 3.05 2.25 2.30 2.50 CR 3.25 3.66 3.75 2.55 2.65 2.75 2.40 1.45 2.50 EPS…

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19 A bank will only continue a credit line for one of its small business customers if the small business can keep an acid-test greater than 1. The company's reported current accounts are as follows: . Cash: $6,000 • Accounts receivable (net): $19,000 • Inventory: $8,000 • Short-term investment: $4,500 • Current liabilities: $17,000 Which decision should the bank make? Maintain the credit line because the acid-test ratio is 2.21. O Close the credit line because the acid-test ratio is 0.45. O Close the credit line because the acid-test ratio is 0.58. Maintain the credit line because the acid-test ratio is 1.74. NEXT > BOOKMARK

2. Protecting Interest Income/Revenue• From the banker’s point of view, when the banker quotes a floating interest, in doingso, the banker is passing on the interest rate risk to the borrower.• What if the banker has to quote a fixed interest rate but his cost of funds are floating?In this case, the customer/borrower faces no risk but the banker does.• Example: As a Credit Officer bank you have agreed to provide a customer with a fixedrate, 3-month, RM 20 million loan 90 days from today. You had priced the loan at 12%annual interest rate.• The following quotes are available in the market.3-month KLIBOR = 9 %3-month KLIBOR futures = 90.0 (matures in 90 days) How would you protect yourself from a rise interest rates?

Give typing answer with explanation and conclusion  Q. 23 Why do commercial banks focus on relatively short-term loans?   - b/ short term loans allow rapid turnover of cash flows   - a/ short-term loans are safer   - a,b, and c   - c/ these banks need to coordinate their portfolio with changes in economic conditions and the level of interest rates   - b and c

When deposit inflows exceed loan demand a bank can A. No answer text provided. B. buy back shares C. give larger dividends to customers D. invest to safe fixed income securities -

13- Banks advance loans to its customers up to a certain amount, if there are no deposits in the current account. Which of the following is being referred to? a. Bills of Exchange b. Fixed Deposit c. Overdraft d. Long Term Loans

Answer true or false 1..Your personality should be considered in making an investment 2. An investors financial position will also affect his or her objectives. 3. You will incur pre-termination charges against the earnings of your time deposit if you will pull-out your investment from the bank prior to maturity.

Balance sheet ($ million) Cash $10 50 Loans Securities 15 Deposit Equity $68 7 The bank is expecting a $15 net deposit drain. Show the bank's balance sheet if: a. The bank purchases liability to offset this expected drain. b. The bank uses the asset side liquidity to finance this expected drain.