Exam Ii Review Sheet Essay

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Exam II Review Questions Chapter 13 1. a) A bank has risk-weighted assets of $175 and equity of $12.5. If regulators require a minimum risk-weighted capital ratio of 5% given the current level of equity, how many new assets with a 100% risk weight can the bank add? How many with a 50% risk weight? b) If the bank had 20% more equity, how many new assets with a 100% risk weight could the bank add? How many with a 50% risk weight? How does having more equity affect a bank's ability to grow? How is this growth affected by the riskiness of the bank's assets? 2. Cite one law or regulation per each of the following categories: * Safety and Soundness Regulation * Monetary Policy Regulation * Credit Allocation Regulation…show more content…
What is the basis for the bankers' concern? What does the credit union industry argue? What kind of limits on credit unions are the bankers seeking? 9. How do the primary risks of credit unions differ from banks? From savings institutions (SIs)? From finance companies? 10. In class we briefly discussed Micro Finance institutions (MFIs). What markets do MFIs typically serve? What are the major criticisms of MFIs? What financial institutions in the US closely resemble MFIs? Chapter 15 11. A 65-year-old wishes to convert the cash value of his insurance policy into an annuity. He can select an annuity that will last 15 years or one that lasts 20 years. If the cash value is $450,000 and interest rates are 5.25%, how much less per year will he receive if he chooses the 20-year annuity? 12. What three main sources of underwriter risk exist for insurers? 13. Why are P&C insurers dependent on investment yields? Is this an argument for changing how this industry operates and/or how we regulate the industry? Explain 14. What is the combined ratio after dividends for this line? Are premiums sufficient to generate profitability for this line? Why or why not? 15. What is the operating ratio for this line? Is the line profitable? 16. Everything else constant, what is the maximum expected loss ratio that would yield a profitable line after including investment income? Chapter
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