Question 1

The employee productivity ratio for a bank is equal to:

Accepted Answer

A) net operating revenue less total interest expenses per employee. 
B) total interest and noninterest expense per employee. 
C) net operating income per full-time-equivalent employee. 
D) total operating earnings less salaries and wages expense per employee. 
E) None of the options is correct.

Question 2

In recent years,the U.S.banking industry's equity multiplier has generally risen in response to regulatory pressure to raise more capital.

Accepted Answer

A) True 
 B)False

Question 3

The equity multiplier measures the amount of _____________________ for a bank and is one principal component of the bank's ROE.

Accepted Answer

The answer of The equity multiplier measures the amount of...

Question 4

Norman Bank made a loan of $1,000,000 to Jarod LeFevre.Jarod has declared bankruptcy and Norman Bank has just learned that the judge in the case has ruled that Jarod does not have to pay any part of the loan back or forfeit any of his assets.Which type of risk would this be an example of?

Accepted Answer

A) Operational risk 
B) Legal risk 
C) Compliance risk 
D) Strategic risk 
E) Reputation risk

Question 5

Which of the following ratios would be a measure of market risk?

Accepted Answer

A) Nonperforming Loans/Net Loans 
B) Net Loans/Total Assets 
C) Cash and equivalents/Total assets 
D) Equity Capital/Total Assets 
E) None of the options is correct

Question 6

One part of ROE is ________________________ or net income divided by pre-tax net operating income,which measures a financial firm's use of security gains and losses and other tax management tools to minimize tax exposure.

Accepted Answer

The answer of One part of ROE is ________________________ or...

Question 7

A bank expects to pay a dividend of $3.45 next year and growth rate on dividends to be 7%.If the appropriate discount rate is 15%,what should the bank's stock price be in the market?

Accepted Answer

A) $23.00 
B) $43.13 
C) $46.14 
D) $49.29 
E) $24.61

Question 8

Harrison Bank has the following financial information. $\begin{array} { | c | r | } 
\hline \text { Net Profit Margin } & 12.5 \% \
\hline \text { Net Income } & \$ 1000 \
\hline \text { Total Assets } & \$ 62,500 \
\hline \text { Total Equity } & \$ 6250 \
\hline
\end{array}$
What is the bank's total operating revenue?

Accepted Answer

A) $125 
B) $8,000 
C) $488,281 
D) $31,250,000 
E) None of the options is correct

Question 9

Financial institutions that pursue the "quiet life" as a goal face less risk of losing earnings or market share.

Accepted Answer

A) True 
 B)False

Question 10

A bank that has a high asset utilization (AU)ratio most likely:

Accepted Answer

A) is doing a poor job of controlling expenses. 
B) has a small amount of financial leverage. 
C) has a small amount of liquidity risk. 
D) is allocating assets to the most productive investments. 
E) None of the options is correct

Question 11

The TRC Bank has a net profit margin of 7.5%,an asset utilization ratio of 18%,and an equity multiplier of 20.What is the bank's ROE?

Accepted Answer

A) 27.00 percent 
B) 1.35 percent 
C) 7.50 percent 
D) 1.50 percent 
E) 3.6 percent

Question 12

Which of the following is an indicator of increasing capital risk in a bank?

Accepted Answer

A) Rise in the market yields on debt issued by a bank and market yields on government securities of similar maturities 
B) Fall in the ratio of stock price per share to earnings per share 
C) Decline in the ratio of equity capital to total assets 
D) Increase in purchased funds as a percentage of total liabilities 
E) All of the options are correct.

Question 13

What do loans and security investments represent for a bank?

Accepted Answer

A) Earning assets 
B) Contra-assets 
C) Discretionary accounts 
D) Market-valued assets 
E) None of the options is correct

Question 14

Smaller banks usually have fewer liquid assets than larger banks.

Accepted Answer

A) True 
 B)False

Question 15

Charge-offs represent the securities a bank decides to sell because they have declined in value.

Accepted Answer

A) True 
 B)False

Question 16

________________________ includes violations of rules and regulations.It can include failure to hold adequate capital which can lead to costly corrective actions.

Accepted Answer

The answer of ________________________ includes violations of rules and regulations.It...

Question 17

The ratio of a bank's interest income from its loans and security investments less interest expenses on debt issued,divided by total earning assets measures a bank's:

Accepted Answer

A) net operating margin. 
B) net return before special transactions. 
C) net interest margin. 
D) return on assets. 
E) None of the options is correct

Question 18

If the expected stream of future dividends for a bank's shareholder rises,the bank's stock price should also rise,other factors held constant.

Accepted Answer

A) True 
 B)False

Question 19

________________________ refers to variability in earnings resulting from actions taken by the legal system including unenforceable contracts,lawsuits,and adverse judgements.

Accepted Answer

The answer of ________________________ refers to variability in earnings resulting...

Question 20

Following is the information listed below for Carter State Bank.What is the bank's asset utilization ratio? $\begin{array} { l l } 
\text { Net income } & \$ 55 \text { million } \
\text { Total operating revenue } & \$ 650 \text { million } \
\text { Total assets } & \$ 4,055 \text { million } \
\text { Total equity capital } & \$ 350 \text { million }
\end{array}$

Accepted Answer

A) 8.46 percent 
B) 16.03 percent 
C) 15.71 percent 
D) 1.36 percent 
E) None of the options is correct

Exam 6: Measuring and Evaluating the Performance of Banks and Their Principal Competitors

The employee productivity ratio for a bank is equal to:

In recent years,the U.S.banking industry's equity multiplier has generally risen in response to regulatory pressure to raise more capital.

The equity multiplier measures the amount of _____________________ for a bank and is one principal component of the bank's ROE.

Norman Bank made a loan of $1,000,000 to Jarod LeFevre.Jarod has declared bankruptcy and Norman Bank has just learned that the judge in the case has ruled that Jarod does not have to pay any part of the loan back or forfeit any of his assets.Which type of risk would this be an example of?

Which of the following ratios would be a measure of market risk?

One part of ROE is ________________________ or net income divided by pre-tax net operating income,which measures a financial firm's use of security gains and losses and other tax management tools to minimize tax exposure.

A bank expects to pay a dividend of $3.45 next year and growth rate on dividends to be 7%.If the appropriate discount rate is 15%,what should the bank's stock price be in the market?

Financial institutions that pursue the "quiet life" as a goal face less risk of losing earnings or market share.

A bank that has a high asset utilization (AU) ratio most likely:

The TRC Bank has a net profit margin of 7.5%,an asset utilization ratio of 18%,and an equity multiplier of 20.What is the bank's ROE?

Which of the following is an indicator of increasing capital risk in a bank?

What do loans and security investments represent for a bank?

Smaller banks usually have fewer liquid assets than larger banks.

Charge-offs represent the securities a bank decides to sell because they have declined in value.

________________________ includes violations of rules and regulations.It can include failure to hold adequate capital which can lead to costly corrective actions.

The ratio of a bank's interest income from its loans and security investments less interest expenses on debt issued,divided by total earning assets measures a bank's:

If the expected stream of future dividends for a bank's shareholder rises,the bank's stock price should also rise,other factors held constant.

________________________ refers to variability in earnings resulting from actions taken by the legal system including unenforceable contracts,lawsuits,and adverse judgements.