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1、Financial Markets and Institutions, 6e (Mishkin/Eakins)Chapter 24 Risk Management in Financial Institutions24.1 Multiple Choice1) Banks face the problem of in loan markets because bad credit risks are the onesmost likely to seek bank loans.A) adverse selectionB) moral hazardC) moral suasionD) intent
2、ional fraudAnswer: AQuestion Status: Previous Edition2) If borrowers with the most risky investment projects are more likely to seek bank loans than borrowers with the safest investment projects, banks face the problem ofA) adverse credit risk.B) adverse selection.C) moral hazard.D) conflict of inte
3、rest.Answer: BQuestion Status: Previous Edition3) Because borrowers, once they have a loan, are more likely to invest in high-risk investment projects, banks face theA) adverse selection problem.B) lemon problem.C) adverse credit risk problem.D) moral hazard problem.Answer: DQuestion Status: Previou
4、s Edition4) Banks* attempts to solve adverse selection and moral hazard problems help explain loan management principles such asA) screening and monitoring of loan applicants.B) collateral and compensating balances.C) credit rationing.D) all of the above.E) only A and B of the above.Answer: DQuestio
5、n Status: Previous Edition5) In one sense,appears surprising since it means that the bank is not itsportfolio of loans and thus is exposing itself to more risk.A) specialization in lending; diversifyingB) specialization in lending; rationingC) credit rationing; diversifyingD) screening; rationingAns
6、wer: AQuestion Status: Previous Edition45) A bank manager concerned about interest income who expects interest rates to fall and who knows the bank currently has a positive gap should rate-sensitive assets andrate-sensitive liabilities.)/ )/ )z A B c Dincrease; increase decrease; increase decrease;
7、decrease increase; decreaseAnswer: BQuestion Status: Previous Edition24.2 True/False1) If a bank has more rate-sensitive liabilities than assets, then an increase in interest rates will reduce bank profits.Answer: TRUEQuestion Status: Previous Edition2) The deference between rate-sensitive liabiliti
8、es and rate-sensitive assets is known as the duration gap.Answer: FALSEQuestion Status: Previous Edition3) If a bank has a negative gap, then a decrease in interest rates will increase income. Answer: TRUEQuestion Status: Previous Edition4) Banks face the problem of adverse selection in loan markets
9、 because bad credit risks are the ones most likely to seek bank loans. Answer: TRUEQuestion Status: Previous Edition5) Due-on-sale clauses in loan contracts reduce moral hazard.Answer: FALSEQuestion Status: Previous Edition6) A correspondent account is sometimes required of a borrower as a condition
10、 for a loan. Answer: FALSEQuestion Status: Previous Edition7) Credit rationing reduces adverse selection problems.Answer: TRUEQuestion Status: Previous Edition8) Credit rationing occurs when lenders charge higher interest rates on the loans they make to riskier borrowers.Answer: FALSEQuestion Status
11、: Previous Edition9) Developing and maintaining long-term customer relationships help to reduce banks1 costs of screening and monitoring borrowers.Answer: TRUEQuestion Status: Previous Edition10) Measuring the sensitivity of bank profits to changes in interest rates by multiplying the gap for severa
12、l maturity subintervals by the change in the interest rate is called duration analysis. Answer: FALSEQuestion Status: Previous Edition11) If interest rates rise by 5 percentage points, then bank profits (measured using gap analysis) will increase regardless of the income gap.Answer: FALSEQuestion St
13、atus: Previous Edition24.3 Essay1) What is the difference between credit risk and interest-rate risk?Question Status: Previous Edition2) How is credit risk related to the concepts of adverse selection and moral hazard?Question Status: Previous Edition3) What steps do banks take to reduce their expos
14、ure to credit risk?Question Status: Previous Edition4) How do the concepts of adverse selection and moral hazard explain the credit risk management principles that banks adopt?Question Status: Previous Edition5) What is gap analysis and why is it important to a bank?Question Status: Previous Edition
15、6) What is duration gap analysis and why is it important to a bank?Question Status: Previous Edition7) Explain how banks benefit from long-term customer relationships.Question Status: Previous Edition8) Explain how banks benefit from specialization in lending.Question Status: Previous Edition9) What
16、 special assumptions do income and duration gap analyses make about interest rate changes and the yield curve?Question Status: Previous Edition6) From the standpoint of, specialization in lending is surprising but makes perfect sense when one considers the problem.A) moral hazard; diversificationB)
17、diversification; moral hazardC) adverse selection; diversificationD) diversification; adverse selectionAnswer: DQuestion Status: Previous Edition7) Provisions in loan contracts that proscribe borrowers from engaging in specified risky activities are calledA) proscription bonds.B) collateral clauses.
18、C) restrictive covenants.D) liens.Answer: CQuestion Status: Previous Edition8) Banks attempt to screen good from bad credit risks to reduce the incidence of loan defaults. To do this, banksA) specialize in lending to certain industries or regions.B) write restrictive covenants into loan contracts.C)
19、 expend resources to acquire accurate credit histories of their potential loan customers.D) do all of the above.Answer: DQuestion Status: Previous Edition9) A banks commitment (for a specified future period of time) to provide a firm with loans up to a given amount at an interest rate that is tied t
20、o a market interest rate is calledA) credit rationing.B) a line of credit.C) continuous dealings.D) none of the above.Answer: BQuestion Status: Previous Edition10) Lines of credit and long-term relationships between banks and their customersA) reduce the costs of information collection.B) make it ea
21、sier for banks to screen good from bad risks.C) enable banks to deal with moral hazard contingencies that are neither anticipated nor specified in restrictive covenants.D) do all of the above.E) do only A and B of the above.Answer: DQuestion Status: Previous Edition11) Compensating balancesA) are a
22、particular form of collateral commonly required on commercial loans.B) are a required minimum amount of funds that a borrower (i.e., a firm receiving a loan) must keep in a checking account at the bank.C) allow banks to monitor firms check payment practices which can yield information about their bo
23、rrowers* financial conditions.D) all of the above.Answer: DQuestion Status: Previous Edition12) A bank that wants to monitor the check payment practices of its commercial borrowers, so that moral hazard can be prevented, will require borrowers toA) place a bank officer on their board of directors.B)
24、 place a corporate officer on the banks board of directors.C) keep compensating balances in a checking account at the bank.D) do all of the above.E) do only A and B of the above.Answer: CQuestion Status: Previous Edition13) Of the following methods that banks might use to reduce moral hazard problem
25、s, the one not legally permitted in the United States is the requirement thatA) firms keep compensating balances at the banks from which they obtain their loans.B) firms place on their board of directors an officer from the bank.C) loan contracts include restrictive covenants.D) individuals provide
26、detailed credit histories to bank loan officers.Answer: BQuestion Status: Previous Edition14) When a lender refuses to make a loan, although borrowers are willing to pay the stated interest rate or even a higher rate, it is said to engage inA) constrained lending.B) strategic refusal.C) credit ratio
27、ning.D) collusive behavior.Answer: CQuestion Status: Previous Edition15) When a lender refuses to make a loan, even though borrowers are willing to pay the stated interest rate or even a higher rate, it is said to engage inA) specialized lending.B) strategic refusal.C) diversified lending.D) coerciv
28、e behavior.E) none of the above.Answer: EQuestion Status: Previous Edition16) Credit rationing occurs when a bankA) refuses to make a loan of any amount to a borrower, even when she is willing to pay a higher interest rate.B) restricts the amount of a loan to less than the borrower would like.C) doe
29、s either A or B of the above.D) does neither A nor B of the above.Answer: CQuestion Status: Previous Edition17) Because larger loans create greater incentives for borrowers to engage in undesirable activities that make it less likely they will repay the loans, banksA) ration credit, granting borrowe
30、rs smaller loans than they have requested.B) ration credit, charging higher interest rates to borrowers who want large loans than to those who want small loans.C) ration credit, charging higher fees as a percentage of the loan to borrowers who want large loans than to those who want small loans.D) d
31、o none of the above.Answer: AQuestion Status: Previous Edition18) When banks offer borrowers smaller loans than they have requested, banks are said toA) shave credit.B) discount the loan.C) raze credit.D) ration credit.Answer: DQuestion Status: Previous Edition19) Which of the following are not gene
32、rally rate-sensitive assets?A) Securities with a maturity of less than one yearB) Variable-rate mortgagesC) Fixed-rate mortgagesD) All of the above are rate-sensitive assetsE) None of the above is a rate-sensitive assetAnswer: CQuestion Status: Previous Edition20) Liabilities that are partially, but
33、 not fully, rate-sensitive includeA) checkable deposits.B) federal funds.C) non-negotiable CDs.D) fixed-rate mortgages.E) money market deposit accounts.Answer: AQuestion Status: Previous Edition21) If a bank has more rate-sensitive liabilities than rate-sensitive assets, then a(n)in interest rates w
34、ill bank profits.X)/ X)/ )/ )/ A B c Dincrease; increaseincrease; reducedecline; reducedecline; not affectAnswer: BQuestion Status: Previous Edition22) If a bank has more rate-sensitive assets than rate-sensitive liabilities, then a(n)in interest rates will bank profits.A) increase; increaseB) incre
35、ase; reduceC) decline; increaseD) decline; not affectAnswer: AQuestion Status: Previous Edition23) If a bank has rate-sensitive assets than rate-sensitive liabilities, then a(n)in interest rates will increase bank profits.A) more; declineB) more; increaseC) less; increaseD) both A and CAnswer: BQues
36、tion Status: Previous Edition24) The difference between rate-sensitive liabilities and rate-sensitive assets is known as theA) duration.B) interest-sensitivity index.C) interest-rate risk index.D) g叩.Answer: DQuestion Status: Previous EditionFirst National BankAssets LiabilitiesRate-sensitiveFixed-r
37、ate$50 million$40 million$20 million$80 millionTable 24.1|7 )/ )/ / A B c D25) Referring to Table 24.1, First National Bank has a gap of -30 +30 60 0Answer: AQuestion Status: Previous Edition26) Referring to Table 24.1, if interest rates rise by 5 percentage points, then bank profits (measured using
38、 gap analysis) willA) decline by $0.5 million.B) decline by $1.5 million.C) decline by $2.5 million.D) increase by $1.5 million.Answer: BQuestion Status: Previous Edition27) Refer to Table 24.1. Assuming that the average duration of its assets is five years, while the average duration of its liabili
39、ties is three years, a rise in interest rates from 5% to 10% will cause the net worth of First National to by of the total original assetvalue.A) increase; 11%B) decline; 11%C) increase; 10%D) decline; 5%Answer: BQuestion Status: Previous EditionFirst National BankAssets LiabilitiesRate-sensitive$40
40、 million$50 milliorFixed-rate$60 million$40 milliorTable 24.228) Referring to Table 24.2, First National Bank has a gap of.A) -10B) 10C) 20D) 0Answer: AQuestion Status: Previous Edition29) Referring to Table 24.2, if interest rates rise by 5 percentage points, then bank profits (measured using gap a
41、nalysis) willA) decline by $0.5 million.B) decline by $1.5 million.C) decline by $2.5 million.D) increase by $2.0 million.Answer: AQuestion Status: Previous Edition30) Refer to Table 24.2. Assuming that the average duration of the banks assets is four years, while the average duration of its liabili
42、ties is three years, a rise in interest rates from 5 percent to 10 percent will cause the net worth of First National to by ofthe total original asset value.A) decline; 5%B) decline; 1.3%C) decline; 6.2%D) increase; 5%Answer: CQuestion Status: Previous Edition31) If First State Bank has a gap equal
43、to a positive $20 million, then a 5 percentage point drop in interest rates will cause profits toA) increase by $10 million.B) increase by $1.0 million.C) decline by $10 million.D) decline by $1.0 million.Answer: DQuestion Status: Previous Edition32) If First National Bank has a gap equal to a negat
44、ive $30 million, then a 5 percentage point increase in interest rates will cause profits toA) increase by $15 million.B) increase by $1.5 million.C) decline by $15 million.D) decline by $1.5 million.Answer: DQuestion Status: Previous Edition33) Measuring the sensitivity of bank profits to changes in
45、 interest rates by multiplying the gap times the change in the interest rate is calledA) basic duration analysis.B) basic gap analysis.C) interest-exposure analysis.D) gap-exposure analysis.Answer: BQuestion Status: Previous Edition34) Measuring the sensitivity of bank profits to changes in interest
46、 rates by multiplying the gap for several maturity subintervals by the change in the interest rate is calledA) basic gap analysis.B) the segmented maturity approach to gap analysis.C) the maturity bucket approach to gap analysis.D) the segmented maturity approach to interest-exposure analysis.E) non
47、e of the above.Answer: CQuestion Status: Previous Edition35) Duration gap analysisA) is a refinement of basic gap analysis that accounts for interest-rate changes over a multiyear period.B) is a refinement of basic gap analysis that accounts for how long a gap will last.C) is a complement to basic gap analysis that accounts for the effect of interest rate changes on market value.D) is a complement to basic gap analysis that accounts for the influence of partially rate-sensitive assets.Answer: CQuestion Status: Previous Edition