1. A bank assumes it has a sufficient geographic area of operations. Nonetheless, it would like to modify and/or reduce the potential credit risk in its loan portfolio. Which of the following steps would be the best match for their goals?

Securitizing some of the loans, to guard against too much liquidity

Increasing the volume of deposits

Securitizing some of the loans, providing an element of liquidity

Buying long-term fixed-income securities

Loosening credit quality requirements for residential loan underwriting

2. which of the following asset mixes is most likely for a bank to be holding?

6.5% Federal agencies and Treasuries, 8% Municipal bonds and 52% Asset-backed securities

52% Federal agencies and Treasuries, 8% Municipal bonds and 6.5% Asset-backed securities

22% Equities, 34% Federal agencies and Treasuries and 16.5% Municipal bonds

16.5% Equities, 34% Federal agencies and Treasuries and 22% Municipal bonds

3. Of the following, which would most likely have the lowest after-tax gross return for a bank, assuming a 32% federal income tax bracket?

• Aaa-rated corporate bond with a 7.25% coupon
• Home mortgage with a 5.75% APR
• Aaa-rated municipal bond purchased at Par with a 4.65% coupon
• Baa-rated municipal bond purchased at Par with a 5.75% coupon

Group of answer choices

5.75% Home mortgage

4.65% coupon Muni

5.75% coupon Muni

7.25% Aaa-rated corporate bond

4. On which of the following would you need to calculate the Tax Equivalent Yield for comparison purposes?

Group of answer choices

Michigan State General Obligation Municipal Bond

USAA Corporate Bond

FNMA Agency security

10 yr US Treasury Bond

5. If a bank opted to sell some of its current securities at a loss but soon after purchased higher yielding securities, what is the most likely reason?

Group of answer choices

They are fearing an inverted yield curve

They have noticeably low loan revenue that year

They have noticeably high loan revenue that year

They simply need liquidity

6.As a category, real estate loans typically have all of the following characteristics except?

Group of answer choices

The condition and value of the property are nearly as important as the borrower's income

They are smaller in size than most other types of loans

They can in some cases be sold to other banks and be securitized

They have some of the longest maturities among other types of loans

7. What is the monthly payment for a $215,000 mortgage with the following characteristics?

• 20 year term
• fixed rate of 5.125%
• payments are made at the end of the period/month

Group of answer choices

$1,399.31

$1,433.79

$1,394.83

$1,452.21

8. Assuming a fixed rate and no prepayments, what is the total payment and total amount of interest paid given the following mortgage information?

• $150,195 Loan
• Monthly payment of $1,350
• 15 yr Term
• payments are made at the end of the period/month

Group of answer choices

$317,000 in payments and $52,805 in interest

$271,000 in payments and $41,305 in interest

$243,000 in payments and $92,805 in interest