For the next three questions, consider the bank financial statements, above.

Question 1 (1 point)

Use the bank balance sheet and the income data above to calculate the net interest margin for this bank. Be sure to express your answer with two digits to the right of the decimal point as in xx.xx% or x.xx%.

Question 1 options:

Question 2 (1 point)

Referring to the previous question, use the bank balance sheet and the income data above to calculate the return on assets for this bank. Be sure to express you answer with two digits to the right of the decimal point as in xx.xx% or x.xx%.

Question 2 options:

Question 3 (1 point)

Referring to the previous question, use the bank balance sheet and the income data above to calculate the return on common equity for this bank as it might be calculated by common shareholders. Be sure to express you answer with two digits to the right of the decimal point as in xx.xx% or x.xx%.

Question 3 options:

Question 4 (1 point)

Referring to the previous balance sheet and the income statement, what is the Regulatory Capitalization ratio? Be sure to express your answer in terms of xx.xx% or x.xx%.

Question 4 options:

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Question 5 (1 point)

Suppose an unexpected loss in the real estate portfolio required a write-off of $252 million. What would the CET1 (Common Equity Tier 1) Capitalization Ratio be then?

Question 5 options:

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Question 6 (1 point)

Consider the bank above. What is the regulatory capitalization ratio?

Question 6 options:

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Question 7 (1 point)

Consider the bank above which is the same bank. The regulatory authorities have decided that the regulatory capital ratio for this bank should be 10%. The bank decides to comply with this ruling by issuing new subordinated debentures. How much will the bank have to issue to be in compliance with the ruling?

Question 7 options:

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Question 8 (1 point)

Consider the bank above which is the same bank. while it is true that the regulatory authorities have decided that the regulatory capital ratio for this bank should be 10%. there is a second page to the ruling. On the second page the regulators say that the bank must also have CET1 capitalization at 8.00%. However, they will be satisfied if the bank achieves a CET1 capitalization ratio of 6.5% by next year. If the bank decides to raise the entire amount needed to reach 6.5% (not the 8.00%) by issuing common equity, how much will it need to raise?

Question 8 options:

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Question 9 (1 point)

Of the all the measures of bank performance below, which one is considered the best measure of the quality of the bank's management?

Question 9 options:

	Net Profits or Net Income
	Net Interest Margin.
	Return on Assets
	Return on Equity
	Capitalization ratio.

Question 10 (1 point)

Of the all the strategies below, which one is the easiest way to improve bank return on equity (assuming that there are no regulatory constraints)?

Question 10 options:

	Developing more core deposits and investing them in interest-earning assets.
	Buying more purchase deposits and investing them in interest-earning assets.
	Developing fee-earning business that don't depend on increasing assets.
	Buying more purchase funds and using the money to retire equity.

Question 11 (1 point)

Of the all the strategies below, which one is considered the best way to increase Return on Equity in terms of risk/reward trade-off - "risk management?"

Question 11 options:

	Developing more core deposits and investing them in interest-earning assets.
	Buying more purchase deposits and investing them in interest-earning assets.
	Developing fee-earning business that don't depend on increasing assets.
	Buying more purchase assets and using the money to retire equity.

Question 12 (1 point)

Of the all the strategies below, which one is the most likely to be pursued by a retail bank as opposed to a money-center bank?

Question 12 options:

	Developing more core deposits and investing them in interest-earning assets.
	Buying more purchase deposits and investing them in interest-earning assets.
	Developing fee-earning business that don't depend on increasing assets.
	Buying more purchase assets and using the money to retire equity.

Question 13 (1 point)

Which of the following four statements is true about the conflict between banks and their regulators?

Question 13 options:

	While banks focus on ROE and want to maximize equity, regulators focus on the capitalization ratio and want to minimize equity.
	While banks focus on the capitalization ratio and want to maximize equity, regulators focus on the ROE and want to minimize equity.
	While banks focus on the capitalization ratio and want to minimize equity, regulators focus on the ROE and want to maximize equity.
	While banks focus on ROE and want to minimize equity, regulators focus on the capitalization ratio and want to maximize equity.

Question 14 (1 point)

A particular bank is required by the regulators to maintain a CET1 capitalization rate of 10.50% (based on Tier 1 Capital). The bank's capital structure consists of $100 million in subordinated debentures and $525 million in equity. What is maximum amount of risk-weighted assets it can own?

Question 14 options:

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Question 15 (1 point)

Referring to the previous question, how much in core deposits plus purchase funds will the bank require to accumulate the maximum amount of assets?

Question 15 options:

Question 16 (1 point)

All of the statements below are true for at least some banks. Some of the items on the following list of bank characteristics pertain to large banks and some to small banks. Which two from the following list of bank size characteristics are different from the others ?

Question 16 options:

	a. Purchase money.
	b. Diversified asset base.
	c. Economies of Scale in regulatory compliance.
	d. Easy to Regulate.
	e. Stable Deposit base.
	f. Diversified array of business services.
	g. Transparency of Management.
	h. Better quality small business lending.

252 3948 2772 Assets Vault Cash Deposits at FRB Marketable Securities Commercial Loans Consumer Loans Real Estate Loans Premises 84 504 2352 588 420 4200 Liabilities and Equity Demand Deposits Time deposits Purchase Funds Sub Debs 336 Preferred Stock 84 Common Stock 1008 Total Regulatory Capital 304 252 1428 8400 8400 588 378 Interest Income Interest Expenditure Other Income Other Expenses 84 58.8 252 3948 2772 Assets Vault Cash Deposits at FRB Marketable Securities Commercial Loans Consumer Loans Real Estate Loans Premises 84 504 2352 588 420 4200 Liabilities and Equity Demand Deposits Time deposits Purchase Funds Sub Debs 336 Preferred Stock 84 Common Stock 1008 Total Regulatory Capital 304 252 1428 8400 8400 588 378 Interest Income Interest Expenditure Other Income Other Expenses 84 58.8