ANALYSIS: Circle TRUE or FALSE to these next statements, using the data provided above.Assume all else stays the same for each statement.

a.TRUE or FALSE: If 65% of the institution's invested assets are considered Interest Sensitive Assets, while 45% of liabilities are considered to be Interest Sensitive Liabilities, then when market interest rates rise next year, GAP will rise causing ROA & ROE to rise.

b.TRUE or FALSE: If the institution shifts $10 million from Corporate loans to Personal/Consumer loans, then the default rate associated with the loan portfolio will rise.

c.TRUE or FALSE: If Required Reserves were to require the shifting of invested funds into cash holdings (causing a movement of funds from other asset accounts), then the GAP, ROA & ROE would all rise.

d.TRUE or FALSE: Replacing $1 billion in five-year NCDs with $1 billion of 1-year NCDs will increase ROA & ROE in the current year.

e.TRUE or FALSE: A brief explanation as to why the bank would be cautious (concerned) with the longer-term impact of the decision to use fewer 5-year NCDs and more 1-year NCDs above in #3 is that there would be less "safe" money in that the bank would need to go back to the market for funds more often, thus increasing its risk (especially interest rate risk).

f.TRUE or FALSE: The bulk of the liquid position of any bank is held in Vault Cash, which improves flexibility and reduces cost thus improving ROA.

g.TRUE or FALSE: Shifting $1 billion from T-bills to make small business loans would be expected to raise ROA but would decrease the institution's secondary liquidity position.

h.TRUE or FALSE: If market interest rates are expected to rise next year, then it would be best to begin shifting into longer term sources of funds now.

i.TRUE or FALSE: Shifting from raising $1 billion in longer-term NCDs (Time Deposits) to Equity from increasing Retained Earnings would raise ROA, but will increase the Capital Ratio and may reduce ROE.

j.TRUE or FALSE: The bank will replace $200 million in five-year NCDs with a variable rate preferred stock issue based on the 1-year NCD rate + 2%. This change in Capital will increase ROA and increase the Total Capital ratio.