1. Mark which statements are True (T) or False (F) ( ) A bank can increase its ROE by raising its asset utilization ratio ( When buying financial stocks, investors will always prefer banks with the highest net interest margin, regardless of risk Banks with low profit margins can boost their ROA by increasing its asset utilization ratio ( ) A bank's spread ratio measures the difference between the average cost of interest-bearing liabilities and the average yield on earning assets ( ) The equity multiplier of a bank is the ratio of its total assets to total debt 2. Mark which statements are True (T) or False (F) (If investors expect that that the future rate of inflation will decline 200 bps, it is likely that the yield curve will flatten ( ) When comparing two corporate 10-year bonds, the more illiquid the bond is the lower its yield-to-maturity will be ( When comparing two corporate 10-year bonds, the higher the probability of default the higher the bond yield will be ( ) A bond yield is determined by the real interest rate, the inflation premium, and a combination of risk premia (If you buy a bond at a discount, you will make a capital gain if you hold the bond until maturity