Reference no: EM131949878

1. A savings and loan has a return on assets (ROA) of 1.5 percent, and an equity to asset ratio of 8%. What is its ROE?

a. 18.75%

b. 15.75%

c. 12.75%

d. 10.75%

2. A bank has rate-sensitive assets of $100 and rate-sensitive liabilities of $200, which of the following answers is correct for this bank's funding gap and interest rate risk?

a. It has a positive funding gap, and hence, interest rate risk if interest rates fall.

b. It has a negative funding gap, and hence risk of a fall in its NIM if interest rates fall.

c. It has a negative funding gap, and hence risk of a fall in its NIM if interest rates rise

d. it has a zero funding gap, and hence no change in its NIM if interest rates change.

3. To measure credit risk, which of the following are indicators of great credit risk for a bank's loan portfolio relative to other peer banks.

a. A larger % of commercial real estate and construction development loans.

b. A larger percentage of net loan losses.

c. A low earnings to net loan losses ratio.

d. A low loan allowance to net losses.

e. All of the above

4. Which of the following are indicators of greater liquidity risk for a bank?

A lower core deposit to total liabilities ratio.

A larger % of off-balance sheet loan commitments.

A lower % of short-term securities to total assets.

A larger net loans to total assets ratio.

All of the above