1、what do you think about "too big to fail"? use the case study - savings and loans debacle to illustrate. ( please read the case study from 1.3)
2、what are types of risks of banks? and explain each risk of banks.
2. the regulation, organization, structure, and changing dynamics of banking industry
class assignment 2
1、what are regulations of financial institutions? why are financial institutions among the most regulated sectors in the world?
2、the nonperforming loan rate has been increasing for the commercial banks in the recent years in china. what do you think the reason behind? how does it link with structure change in the economy?
3、what relationship appears to exist between bank size, efficiency, and operating costs per unit of service produced and delivered?
4. interest rate risk
interest rate risk quiz
1、the term structure of interest rates assumes that a、the risk of all assets is the same. b、the time to maturity for all assets is the same. c、the coupon rate of all assets is the same. d、the market value of assets is the same. .
2、the unbiased expectations theory of the term structure of interest rates a、assumes that long-term interest rates are an arithmetic average of short-term rates b、assumes that the yield curve reflects the market's current expectations of future short-term interest rates. c、recognizes that forward rates are perfect predictors of future interest rates. d、assumes that risk premiums increase uniformly with maturity
3、the liquidity premium theory of the term structure of interest rates a、assumes that investors will hold long-term maturity assets if there is a sufficient premium to compensate for the uncertainty of the long-term. b、assumes that long-term interest rates are an arithmetic average of short-term rates plus a liquidity premium. c、recognizes that forward rates are perfect predictors of future interest rates. d、assumes that risk premiums increase uniformly with maturity.
4、the market segmentation theory of the term structure of interest rates a、assumes that investors will hold long-term maturity assets if there is a sufficient premium to compensate for the uncertainty of the long-term. b、assumes that the yield curve reflects the market's current expectations of future short-term interest rates. c、assumes that market rates are determined by supply and demand conditions within fairly distinct time or maturity buckets. d、fails to recognize that forward rates are not perfect predictors of future interest rates.
5、conyers bank holds u.s. treasury bonds with a book value of $30 million. however, the u.s. treasury bonds currently are worth $28,387,500. the bank's portfolio manager wants to shorten asset maturities. which of the following statements is true? a、the portfolio manager is reluctant to sell the bonds outright since the bank will have to take a loss. b、the portfolio manager is willing to sell the bonds outright since they are not as valuable as their book value c、the portfolio manager is willing to sell the bonds outright since they are more valuable than their book value d、the portfolio manager is reluctant to sell the bonds outright since the bank will have to pay taxes on the gain.
6、conyers bank holds u.s. treasury bonds with a book value of $30 million. however, the u.s. treasury bonds currently are worth $28,387,500. if the portfolio manager wants to shorten the bank's asset maturity, what type of risk is she concerned about? a、credit risk. b、foreign exchange rate risk. c、the risk of rising interest rates. d、the risk of falling interest rates.
7、the discount rate that equalizes the current market value of a loan or security with the expected stream of future income payments from that loan or security is known as: a、a. bank discount rate. b、b. yield to maturity. c、c. annual percentage rate. d、d. net interest margin.
8、a bank whose interest-sensitive assets total $350 million and its interest-sensitive liabilities amount to $175 million has: a、a. an asset-sensitive gap of $525 million. b、b. a liability-sensitive gap of $175 million. c、c. an asset-sensitive gap of $175 million. d、d. a liability-sensitive gap of $350 million.
9、the third national bank of edmond reports a net interest margin of 5.83 percent. it has total interest revenues of $275 million and total interest expenses of $210 million. what will be the bank's earning assets total? a、a. $4,717 million b、b. $3,602 million c、c. $1,115 million d、d. $3,790 million
10、the raymond burr national bank has $1,000 in assets with an average duration of 5 years. this bank has $800 in liabilities with an average duration of 6.25 years. what is the duration gap of this bank? a、a. -1.25 years b、b. 0 years c、c. 1.25 years d、d. -2.25 years
11、under the so-called funds management view, bank management's control over assets must be coordinated with its control over liabilities, so that asset and liability management are internally consistent.
12、short-term interest rates tend to rise more slowly than long-term interest rates and to fall more slowly when the long-term interest rates in the market are headed down.
13、a financial institution is liability sensitive, if its interest-sensitive liabilities are less than its interest-sensitive assets.
14、banks with a positive cumulative interest-sensitive gap will benefit if interest rates rise, but lose income if interest rates decline.
15、repriceable liabilities include long-term savings and retirement accounts.
16、duration is the weighted average maturity of a promised stream of future cash flows.
17、convexity is a direct measure of the price risk of a bond.
18、a bank with a duration gap of zero is immunized against changes in the value of net worth due to changes in interest rates in the market.
19、a bank with a negative duration gap experiencing a decrease in interest rates will experience an increase in its net worth.
20、a bond with a greater duration will have a smaller price change in percentage terms when interest rates change.
21、the __________________ shows the relationship between the time to maturity and the yield to maturity of bonds.
22、__________________________ is the coordinated management of both the bank's assets and its liabilities.
23、the __________________________ is the rate of return on a financial instrument using a 360-day year relative to the instrument's face value.
24、most lending institutions tend to do better when the yield curve is upward-sloping because they tend to have ____________ maturity gap positions.
interest rate risk quiz - calculation
1、sparkle savings association has interest-sensitive assets of $400 million, interest-sensitive liabilities of $325 million, and total assets of $500 million. (1) what is the bank’s dollar interest-sensitive gap? (2) what is sparkle’s relative interest-sensitive gap? (3) what is the value of its interest-sensitivity ratio? is it asset sensitive or liability sensitive? (4) under what scenario for market interest rates will sparkle experience a gain in net interest income? a loss in net interest income?
2、blue moon national bank holds assets and liabilities whose average durations and dollar amounts are as shown in this table: asset and liability items avg. duration (years) dollar amount (millions) investment grade bonds 15.00 $65.00 commercial loans 3.00 $400.00 consumer loans 7.00 $250.00 deposits 1.25 $600.00 nondeposit borrowings 0.50 $50.00 (1) what is the weighted average duration of blue moon’s asset portfolio? (2) what is the weighted average duration of blue moon’s liability portfolio? (2) what is the leverage-adjusted duration gap?
6. credit risk
class assignment 3
1、what are the principal types of loans made by banks?
2、what three major questions or issues must a lender consider in evaluating nearly all loan requests?
3、the management at sage national bank located in key west, florida, is calculating the key capital adequacy ratios for its third-quarter reports. at quarter-end, the bank’s total assets are $95 million and its total risk-weighted assets including off-balance-sheet items are $75 million. tier 1 capital items sum to $4 million, while tier 2 capital items total $2.5 million. calculate sage national’s leverage ratio, total capital-to-total assets, core capital-to-total risk-weighted assets, and total capital-to-total risk-weighted assets. does sage national meet the requirement stipulated for a bank to qualify as adequately capitalized? in which of the five capital adequacy categories created by u.s. federal regulators for pca purposes does sage national fall? is sage national subject to any regulatory restrictions given its capital adequacy category?
4、richman savings association has forecast the following performance ratios for the year ahead. how fast can richman allow its assets to grow without reducing its ratio of equity capital to total assets, assuming its performance holds reasonably steady over the period?