1. Securitization is designed to turn illiquid loans into liquid assets in the form of securities sold in the open market (true or false)
2. Banks are considered significantly undercapitalized if their leverage ratio is less than?

1. 5%
2. 4%
3. 3%
4. 2%
5. 1%

3. Farm Corp need a $11.25 million loan to refurbish tooling equipment. The 6-month loan is priced at 7.25%. however, the bank indicates that Farm Corp can reduce the rate of 6.75% if it provides a standby credit guarantee for %15,000. Should Farm Corp buy the guarantee?

1. No, Farm corp. loses $13,125
2. Yes, Farm corp. gains $13,125
3. No, Farm corp. loses $27,188
4. Yes, Farm corp. gains $27,188
5. No, Farm cannot afford the guarantee

4. 3/5 bank has a portfolio of $120 million that has been established for 10 years. What is the value at risk (VaR) of the portfolio at a 95% confidence interval?

1. $12 million
2. $ 6 million
3. $5 million
4. $3 million
5. $2.5 million

5. In preparing a credit analysis, which is not one of the 5-Cs of evaluation?

1. Compliance
2. Collateral
3. Capacity
4. Character
5. Conditions

6. Which is not an example of shadow banking?

1. Hedge funds
2. Special purpose vehicles
3. Quicken loans
4. TCF bank
5. All of the above

7. Which is the following is not an example of a negative covenant?

1. Filing of financial statements with the SEC
2. Net worth minimum requirement
3. Restrictions on new debt issuances
4. Sales of assets
5. Restrictions on mergers

Citizen bank has $125 million in total assets which includes $85 million in risk-weighted assets of which $10 million are off-balance sheet items. The banks Tier 1 and Tier 2 components total $5 million and $8 million respectively.

8. What is Citizen banks Leverage ratio?

1. 15.3%
2. 10.4%
3. 6.4%
4. 5.9%
5. 4.0%

9. What is Citizen banks Total Capital-to-Total Asset ratio?

1. 15.3%
2. 10.4%
3. 6.9%
4. 5.9%
5. 4.0%

10. What is Citizen banks Core Capital-to-Risk Ratio?

1. 15.3%
2. 10.4%
3. 6.9%
4. 5.9%
5. 4.0%