Q1) "Assuming total assets and bank capital of COBA bank are 110$ and $8 respectively, what would happen to the bank capital if % change in asset value is -2.9% and % change in liability value is -1.1% when interest rates changes from 10% to 11.5% ?

a) increase to $9.98 million

b) would fall to $6.02 million

c) would fall down 7.86 million

d) would not be changed.

Q2) The Fed can increase the level of reserves available to banks.

I. By lowering the federal fund interest rate

ll. by raising the discount (window) rate.

lll.By selling securities.

IV. By buying securities

a) l & ll

b) ll & lll

c) ll & lV

d) l & lV

Q3) What is the basic measure in managing credit risk?

a)Specialization in lending.

b)Monitoring and Enforcement

c) Solving Asymmetric Information Problems

d)Collateral and Compensating Balances.