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| 1 | |
The "repricing gap" model focuses on changes in the ____________ of a bank. |
| | A) | market value of assets |
| | B) | market value of liabilities |
| | C) | interest income and interest expense |
| | D) | non-interest expense |
| | E) | (a) and (b) |
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| 2 | |
In the "repricing gap" model, consider a loan that will mature in the next 3 months. Then we can say this loan is ____________ within the coming 3-month period. |
| | A) | underfunded |
| | B) | rate sensitive |
| | C) | immunized |
| | D) | matched |
| | E) | hedged |
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| 3 | |
The "repricing gap" for a bank refers to: |
| | A) | ROA minus ROE. |
| | B) | rate-sensitive assets minus rate-sensitive liabilities. |
| | C) | total assets minus total liabilities. |
| | D) | net interest income minus overhead expenses |
| | E) | total assets minus total stockholders' equity. |
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| 4 | |
A bank with a negative 1-year repricing gap would expect ___________ if interest rates fall over the coming year. |
| | A) | an increase in interest income |
| | B) | an increase in interest expense |
| | C) | an increase in net interest income |
| | D) | a decrease in net interest income |
| | E) | (a) and (b) |
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| 5 | |
Consider the "repricing gap" model. If we sum up the various "gaps" for all the maturity buckets out to one year, the result is called the: |
| | A) | duration gap |
| | B) | leverage-adjusted duration gap |
| | C) | immunized gap |
| | D) | net interest income |
| | E) | cumulative gap |
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| 6 | |
Which of the following would not be classified in the "one-year, rate sensitive asset" category? |
| | A) | Treasury bills with six-month maturity. |
| | B) | 3-year maturity business loans, with "floating" interest rates. |
| | C) | Consumer loans with less than one year to maturity. |
| | D) | 3-year maturity business loans, with fixed interest rates. |
| | E) | (a), (b), and (c) |
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| 7 | |
In the basic "repricing gap" model, an increase in market interest rates would: |
| | A) | lower the book value of stockholders' equity of a bank with a negative 1-year gap. |
| | B) | lower the net interest income of a bank with a negative 1-year gap. |
| | C) | increase the net interest income of a bank with a positive 1-year gap. |
| | D) | increase the market value of bank assets. |
| | E) | (a) and (b) |
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| 8 | |
"Duration" has economic meaning as the ___________ of an asset or liability. |
| | A) | interest rate sensitivity |
| | B) | default risk |
| | C) | magnitude of the interest revenues or expenses |
| | D) | time since origination |
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| 9 | |
The "leverage adjusted duration gap": |
| | A) | measures the sensitivity of net interest income to interest rate changes. |
| | B) | equals the "rate sensitive assets" minus the "rate sensitive liabilities." |
| | C) | measures the sensitivity of bank equity value to interest rate changes. |
| | D) | equals total assets minus total liabilities |
| | E) | (a) and (b) |
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| 10 | |
Imaginary State Bank holds just two assets: (1) a loan with market value of $500,000, having duration of 2 years, and (2) a loan with market value of $250,000, having duration of 4 years. Find the duration of this bank's asset portfolio. |
| | A) | 2.67 |
| | B) | 3.00 |
| | C) | 1.00 |
| | D) | 6.00 |
| | E) | 2.00 |
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| 11 | |
Refer to the following, for Basic Bank:
One-year, rate sensitive assets | $80 million | One-year, rate sensitive liabilities | 100 million | Total assets | 160 million | Total liabilities | 145 million |
What is Basic Bank's "one-year repricing gap"? |
| | A) | $80 million |
| | B) | $20 million |
| | C) | $15 million |
| | D) | -$15 million |
| | E) | -$20 million |
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| 12 | |
Refer to the following, for Basic Bank:
One-year, rate sensitive assets | $80 million | One-year, rate sensitive liabilities | 100 million | Total assets | 160 million | Total liabilities | 145 million |
If market interest rates were to fall by one percentage point, what's the expected change in Basic Bank's annual net interest income? |
| | A) | Increase of $150,000 |
| | B) | Increase of $200,000 |
| | C) | Decrease of $800,000 |
| | D) | Decrease of $150,000 |
| | E) | Decrease of $200,000 |
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| 13 | |
A "rate sensitive liability" in a one-year maturity bucket represents the amount of liabilities that ________________ within one year. |
| | A) | may mature |
| | B) | may have adjustable interest rates |
| | C) | may result in a bank run |
| | D) | will not be rolled |
| | E) | (a) and (b) |
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| 14 | |
Which of the following bank balance sheet items would be categorized within the "one-year, rate sensitive liabilities"? |
| | A) | 18-month certificates of deposit |
| | B) | 6-month consumer loans |
| | C) | 3-month certificates of deposit |
| | D) | stockholders' equity |
| | E) | (a) and (c) |
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| 15 | |
When the "spread" between interest rates on RSA and RSL ____________, the bank's net interest income would be expected to ____________. |
| | A) | increases; increase |
| | B) | increases; decrease |
| | C) | decreases; increase |
| | D) | (b) and (c) |
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| 16 | |
Refer to the following interest rate and balance sheet information for Crest National Bank:
The starting average interest rate (on assets and liabilities): 5%
| Market Value (million) | Duration | Total Assets | $40 | 6.0 | Total Liabilities | 37 | 2.0 |
If interest rates fall by 1 percentage point, what is the resulting percentage change in asset value for Crest National Bank? |
| | A) | 6.0% |
| | B) | - 6.0% |
| | C) | - 1.9% |
| | D) | 5.7% |
| | E) | - 5.7% |
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| 17 | |
Refer to the following interest rate and balance sheet information for Crest National Bank:
The starting average interest rate (on assets and liabilities): 5%
| Market Value (million) | Duration | Total Assets | $40 | 6.0 | Total Liabilities | 37 | 2.0 |
What is the "leverage adjusted duration gap" for Crest National Bank? |
| | A) | 3.81 |
| | B) | 4.15 |
| | C) | 3.00 |
| | D) | 3.15 |
| | E) | 12.0 |
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| 18 | |
Refer to the following interest rate and balance sheet information for Crest National Bank:
The starting average interest rate (on assets and liabilities): 5%
| Market Value (million) | Duration | Total Assets | $40 | 6.0 | Total Liabilities | 37 | 2.0 |
If interest rates fallby 1 percentage point, what is the resulting market value change in the bank's equity? |
| | A) | -$1.66 million |
| | B) | $1.66 million |
| | C) | -$1.58 million |
| | D) | $1.58 million |
| | E) | -$1.52 million |
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