First National Bank has assets that are more rate-sensitive than its liabilities.  As interest rates rise, then we should expect the bank profits to: A. Rise B. Fall C. Remain unchanged

Q: How can a bank mitigate LIQUIDITY RISK? Hold a large percentage of its liabilities in Core Deposits…

A: The correct answer for the above mentioned question is given in the following steps for your…

Q: Assume that banks aim to hold no excess reserves. The AAA bank responds to the change in its reserve…

A: Reserve Ratio is the minimum proportion of total deposits that bank need to keep as reserves. A bank…

Q: It is an average interest rate that banks offer in the financial market: a. effective rate b.…

A: Effective Rate: It is the interest rate on a loan provided or financial security restated from the…

Q: All else being equal, if a central bank buys government bonds from the market it would: a. mean…

A: In finance central bank buying government bonds from the market is known as open market operations.

Q: Which of the following would increase a bank’s Net Interest Margin, assuming all else stays the…

A:

Q: When interest rates fall, the rates that a bank pays on deposits typically decline less than the…

A: When interest rates fall, the rates that a bank pays on deposits typically decline less than the…

Q: TRUE OR FALSE 1. Short-term financial policies that are flexible with regard to current assets…

A: 1. Short-term financial policies that are flexible with regard to current assets includes keeping…

Q: The RBA decides to buy bonds and securities from commercial banks on the open market. Other things…

A: When RBA buys bonds in the open market, the money supply in the economy increases, as it buys…

Q: Select all that are true regarding credit risk for a bank. OThis risk is an estimate of future…

A: Credit risk: It is the risk that is faced by the bank when borrower fails to make payment in a…

Q: Reserve requirements effectively impose a tax on bank deposits that reduce profits.  Why does this…

A: The terms "reserve requirement" and "reserve ratio" are sometimes used interchangeably to refer to…

Q: Reserve requirements effectively impose a tax on bank deposits that reduce profits.  Why does this…

A: As interest rates rise, banks could earn more money by lending reserves to borrowers. These profits…

Q: The assets in value by $billion. (Round your response to one decimal place.) The liabilities in…

A: Interest is the return which a depositor or a bank gets from the amount of loan which has been given…

Q: Banks improves the liquidity of the bank by

A: The correct answer is c. Generating additional income from investment

Q: If the duration of all of a bank’s assets with a maturity of greater than one year is similar to…

A: Interest rate risk in banks refers to the current or prospective risk to the bank's capital and…

Q: What are the ways in which a bank can increase its capital adequacy ratio?

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Q: What steps will a bank take to put in place an aggressive /defensive strategy in the face of rising…

A: If there is a difference between the interest sensitive assets and interest sensitive liabilities of…

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A: Loan interest rate is the rate at which interest is charged by bank on the lent amount. Deposit is…

Q: Suppose you are the governor of the Bank of Canada, and the economy is experiencing a recession,…

A: The money supply in macroeconomics refers to the total amount of money owned by the public at any…

Q: Which of the following statements regarding the banks motives for holding reserves is incorrect ? A…

A: reserves in banks are the part of the deposits kept by the bank to themselves. These reserves are…

Q: What are the basic arguments for increasing capital requirements at large commercial banks? In what…

A: The primary argument is that the risk is lesser if the bank increases its capital. In other words…

Q: Suppose the population of Area Y is relatively young, and the population of Area O is relativelyold,…

A: a) Area Y consists of a comparatively young population and will thus save low and have a large…

Q: Select all that are true regarding liquidity risk for a bank. O Consumer trust in the bank ensures a…

A: The answer is provided below.

Q: When a bank holds a lower level of capital, a given dollar level of profits represents a lower…

A: False

Q: Assume two banks are equal to each other in size in terms of total assets. The bank which has more…

A: Explanation: Yes, the bank that would have higher liquidity will have a lower return on equity. The…

Q: If a bank has a negative gap, it is likely that it has a:   a. positive duration gap. b. negative…

A: interest rate gap give the risk of interest on assets and laibilties  Negative gap indicates that…

Q: c) If the interest rates go up by 1%, using the duration and convexity rule to determine the net…

A: c. Computation of the net worth of the bank and equity to asset ratio using the duration and…

Q: Only (b) and (c) are true.

A: Mark to market rule refers to the method in which fair values in the account which relate to the…

Q: Which of the following statement are true?   Direct transfer of capital involves the aid of…

A: The answer for the multiple choice question and relevant explanation are presented hereunder : There…

Q: A bank that grants loans to firms in a many different lines of business:  will increase its…

A: When a bank grants loans to firms in different lines of business then it has to incur more expenses…

Q: all of the following statements about a bank's capital are correct except: bank capital is the…

A: Bank’s capital is the lifeblood for its operations. It shows assets in the form of loan provided and…

Q: Mutual bank managers recognize that their potential gains from taking higher risk are…….., while…

A: The financial institutions that accept deposits from the general public and provide loans to the…

Q: Making changes to a firm’s credit policy involves trade-offs. Assuming that all other factors remain…

A: Cash discount means giving discount for the customers who are paying amount immediately or before…

Q: First National Bank has assets that are more rate-sensitive than its liabilities.  As interest rates…

A: Rate sensitive assets are bank assets, mainly bonds, loans and leases, and the value of these assets…

Q: All else being equal, if a central bank sells government bonds from the market it would: a. decrease…

A: A central bank can buy or sell the government bonds to maintain the supply of money in the economy.…

Q: In a CDO structure, when economic condition turns out to be better than previously expected, the…

A: Collateralized debt obligation (CDO) is a financial instrument which derive its value from asset…

Q: If the deposits/loans ratio is relatively high for a bank, this implies an emphasis on: a.…

A: “Since you have asked multiple questions, we will solve the first question for you.  If you want a…

Q: When the assets of the Central Bank are analyzed, one should see that there is no significant…

A: It has been observed that when the assets of central banks are analyzed, it has been observed that…