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12) When a bank uses money from a checking account to make a loan, it has transformed: A) a short-term liability to a borrower into
12) When a bank uses money from a checking account to make a loan, it has transformed: A) a short-term liability to a borrower into a long-term asset to a saver B) one liability into another liability for the saver C) a financial liability for a saver into a financial asset for a borrower D) a financial asset for a saver/investor into a liability for a borrower 13) The ratio of a bank's profit to its capital is known as: A) return on assets B) leverage C) return on equity D) net interest margin 14) A bank's revenue includes all of the following EXCEPT: A) cash held in bank vault B) financial asset trading activities C) debit and credit card service fees D) interest on loans 15) A mark-to-market involves: A) adjusting cash and/or collateral based the net change on the value of derivatives B) changing the futures price to the spot price C) reducing trading risk by using futures and other derivatives D) updating futures and derivatives prices 16) Short-term loans without collateral between commercial banks are called: A) forward contracts B) repurchase agreements C) discount loans D) federal funds 17) Since most banks have negative gaps, lower interest rates will most likely: A) lower return on assets B) increase time deposits C) increase bank profits D) increase default risk 18) During the financial crisis of 2008, which type of risk was the biggest problem faced by financial institutions? A) credit/default risk B) hedging risk C) interest rate risk D) currency risk Page
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