C) 15.71 percent
D) 1.36 percent
E) None of the above
80. The TRC Bank has a net profit margin of 7.5%, an asset utilization ratio of 18%, an equity
multiplier of 20 times. What is this bank’s ROA?
A) 27.00 percent
B) 1.35 percent
C) 7.50 percent
D) 1.50 percent
E) 3.6 percent
81. The TRC Bank has a net profit margin of 7.5%, an asset utilization ratio of 18%, an equity
multiplier of 20 times. What is this bank’s ROE?
A) 27.00 percent
B) 1.35 percent
C) 7.50 percent
D) 1.50 percent
E) 3.6 percent
82. The Smith-James Bank has an ROE of 17.5%, an asset utilization ratio of 13% and a net profit
margin of 9%. What is this bank’s ROA?
A) 14.96 percent
B) 1.58 percent
C) 1.17 percent
D) 134.62 percent
E) None of the above
83. The Smith-James Bank has an ROE of 17.5%, an asset utilization ratio of 13% and a net profit
margin of 9%. What must this bank’s equity multiplier be?
A) 14.96 times
B) 1.58 times
C) 1.17 times
D) 134.62 times
E) None of the above
84. What is the equity multiplier for a bank where equity is equal to 10 percent of total assets?
A) 90.0
B) 10.0
C) 1.1
D) 110.0
E) 1.0
85. Which of the following ratios would be a measure of credit risk?
A) Nonperforming Loans/Net Loans
B) Net Loans/Total Assets
C) Interest Sensitive Assets/Interest Sensitive Liabilities
D) Equity Capital/Total Assets
E) None of the above
86. Which of the following ratios would be a measure of market risk?
A) Nonperforming Loans/Net Loans
B) Net Loans/Total Assets
C) Interest Sensitive Assets/Interest Sensitive Liabilities
D) Equity Capital/Total Assets
E) None of the above
87. In recent years banks have been __________ profitable than (as) S&Ls and Savings Banks.
A) More
B) Less
C) As
D) Much more
E) Much less
88. Operational risk includes which of the following?
A) Failure of bank’s computer system
B) Closure of a bank for three months due to flooding from a major hurricane
C) Embezzlement of funds of a bank by a teller of the bank
D) Closure of a bank for two weeks due to a fire from a lightening strike
E) All of the above are example of operational risk
89. Brian Smith, CEO of Carter National Bank, decides that interest rates are going to fall in
the future and as a result buys $100 million in 30 year Treasury Bonds for the bank’s
security portfolio. Instead, interest rates rise causing the value of these bonds to fall.
This would be an example of which of the following types of risk?
A) Operational risk
B) Legal risk
C) Compliance risk
D) Strategic risk
E) Reputation risk
90. Chaos State Bank has an old computer system which can go down for weeks at a time,
leaving customers unable to access their accounts online. Many customers have left the
bank for banks with more reliable computer systems. Which type of risk would this be
an example of?
A) Operational risk
B) Legal risk
C) Compliance risk
D) Strategic risk
E) Reputation risk
91. Carson County State Bank has a ratio of equity capital to total assets of 2.5%. The FDIC
which regulates this bank has determined that this is not enough equity capital and is
making the bank issue new stock in the market. In addition, they are not allowing the
bank to issue a dividend to their current stockholders. Which type of risk would this be
an example of?
A) Operational risk
B) Legal risk
C) Compliance risk
D) Strategic risk
E) Reputation risk
92. Everett Bank has just learned that there is a disgruntled former employee who has created
a blog that is telling everyone that Everett Bank has halved their customer service
representatives and so customers have great difficulty getting through to a live person
when there is a problem with their account. Everett is worried that they may lose
customers as a result. Which type of risk would this be an example of?
A) Operational risk
B) Legal risk
C) Compliance risk
D) Strategic risk
E) Reputation risk
93. Norman Bank made a loan of $1,000,000 to Jarod LeFevre. Jarod has declared
bankruptcy and Norman Bank has just learned that the judge in the case has ruled that
Jarod does not have to pay any of the loan back or forfeit any of his assets. Which type
of risk would this be an example of?
A) Operational risk
B) Legal risk
C) Compliance risk
D) Strategic risk
E) Reputation risk
94. Forrest Fennell is thinking about investing in Capital City Bank. He is examining certain
ratios of the bank including the ratio of nonperforming loans to total loans and leases and
the provision for loan losses to total loans and leases. What type of risk is Forrest
attempting to measure with these ratios?
A) Credit risk
B) Liquidity risk
C) Market risk
D) Interest rate risk
E) Operational risk
95. Gerald Wilkens is thinking about investing in Tallahassee State Bank. He is examining
certain ratios of the bank including the ratio of cash assets and government securities to
total assets and purchased funds to total assets. What type of risk is Gerald attempting to
measure with these ratios?
A) Credit risk
B) Liquidity risk
C) Market risk
D) Interest rate risk
E) Operational risk
96. Amy Farmer is thinking about investing in the Guthrie National Bank. She is examining
certain ratios of the bank including the ratio of the book value of the assets to the market
value of the assets and the market value of the bonds held by the bank to their recorded
value. What type of risk is Amy attempting to measure with these ratios?
A) Credit risk
B) Liquidity risk
C) Market risk
D) Interest rate risk
E) Operational risk
97. Paul Smith is thinking about investing in Capital City Bank. He is examining certain
ratios of the bank including the ratio of interest sensitive assets to interest sensitive
liabilities and uninsured deposits to total deposits. What type of risk is Paul attempting to
measure with these ratios?
A) Credit risk
B) Liquidity risk
C) Market risk
D) Interest rate risk
E) Operational risk
98. The Garic State Bank of New Orleans was under water for three weeks after Hurricane
Katrina hit the state. The lobby is full of mud and other debris. Many of the valuables
stored in the bank’s safety deposit boxes have been ruined. John Garic, the President and
CEO of the bank, has been working night and day to reopen the bank. What type of risk
has John been dealing with?
A) Credit risk
B) Liquidity risk
C) Market risk
D) Interest rate risk
E) Operational risk
99. Castle State Bank has the following financial information.
Balance Sheet
Income Statement
Cash
$100
Interest Income
$400
Securities Investments
$600
Interest Expenses
($150)
Net Loans
$1200
Non-Interest Income
$50
Net Premises and Equip.
$300
Non-Interest Expenses
($100)
Total Assets
$2200
Provision for Loan Losses
($60)
Deposits
$1100
Pre Tax Net Operating Income
$140
Non-Deposit Borrowings *
$800
Securities Gains (Losses)
($40)
Equity Capital
$300
Taxes
($45)
Total Liabilities and Equity
$2200
Net Income
$55
* All Purchased Funds
Use this information to calculate Castle State Bank’s ROE
A) 20.45%
B) 18.33%
C) 12.22%
D) 7.33%
E) 2.5%
100. Castle State Bank has the following financial information.
Balance Sheet
Income Statement
Cash
$100
Interest Income
$400
Securities Investments
$600
Interest Expenses
($150)
Net Loans
$1200
Non-Interest Income
$50
Net Premises and Equip.
$300
Non-Interest Expenses
($100)
Total Assets
$2200
Provision for Loan Losses
($60)
Deposits
$1100
Pre Tax Net Operating Income
$140
Non-Deposit Borrowings *
$800
Securities Gains (Losses)
($40)
Equity Capital
$300
Taxes
($45)
Total Liabilities and Equity
$2200
Net Income
$55
* All Purchased Funds
Use this information to calculate Castle State Bank’s ROA
A) 20.45%
B) 18.33%
C) 12.22%
D) 7.33%
E) 2.5%
101. Castle State Bank has the following financial information.
Balance Sheet
Income Statement
Cash
$100
Interest Income
$400
Securities Investments
$600
Interest Expenses
($150)
Net Loans
$1200
Non-Interest Income
$50
Net Premises and Equip.
$300
Non-Interest Expenses
($100)
Total Assets
$2200
Provision for Loan Losses
($60)
Deposits
$1100
Pre Tax Net Operating Income
$140
Non-Deposit Borrowings *
$800
Securities Gains (Losses)
($40)
Equity Capital
$300
Taxes
($45)
Total Liabilities and Equity
$2200
Net Income
$55
* All Purchased Funds
Use this information to calculate Castle State Bank’s net profit margin
A) 20.45%
B) 18.33%
C) 12.22%
D) 7.33%
E) 2.5%
102. Castle State Bank has the following financial information.
Balance Sheet
Income Statement
Cash
$100
Interest Income
$400
Securities Investments
$600
Interest Expenses
($150)
Net Loans
$1200
Non-Interest Income
$50
Net Premises and Equip.
$300
Non-Interest Expenses
($100)
Total Assets
$2200
Provision for Loan Losses
($60)
Deposits
$1100
Pre Tax Net Operating Income
$140
Non-Deposit Borrowings *
$800
Securities Gains (Losses)
($40)
Equity Capital
$300
Taxes
($45)
Total Liabilities and Equity
$2200
Net Income
$55
* All Purchased Funds
Use this information to calculate Castle State Bank’s asset utilization ratio
A) 20.45%
B) 18.33%
C) 12.22%
D) 7.33%
E) 2.5%
103. Castle State Bank has the following financial information.
Balance Sheet
Income Statement
Cash
$100
Interest Income
$400
Securities Investments
$600
Interest Expenses
($150)
Net Loans
$1200
Non-Interest Income
$50
Net Premises and Equip.
$300
Non-Interest Expenses
($100)
Total Assets
$2200
Provision for Loan Losses
($60)
Deposits
$1100
Pre Tax Net Operating Income
$140
Non-Deposit Borrowings *
$800
Securities Gains (Losses)
($40)
Equity Capital
$300
Taxes
($45)
Total Liabilities and Equity
$2200
Net Income
$55
* All Purchased Funds
Use this information to calculate Castle State Bank’s equity multiplier
A) 20.45 times
B) 18.33 times
C) 12.22 times
D) 7.33 times
E) 2.5 times
104. Castle State Bank has the following financial information.
Balance Sheet
Income Statement
Cash
$100
Interest Income
$400
Securities Investments
$600
Interest Expenses
($150)
Net Loans
$1200
Non-Interest Income
$50
Net Premises and Equip.
$300
Non-Interest Expenses
($100)
Total Assets
$2200
Provision for Loan Losses
($60)
Deposits
$1100
Pre Tax Net Operating Income
$140
Non-Deposit Borrowings *
$800
Securities Gains (Losses)
($40)
Equity Capital
$300
Taxes
($45)
Total Liabilities and Equity
$2200
Net Income
$55
* All Purchased Funds
Use this information to calculate Castle State Bank’s earnings spread
A) 37.5%
B) 22.22%
C) 14.33%
D) 7.89%
E) 2.5%
105. Harrison Bank has the following financial information.
Net Profit Margin
12.5%
Net Income
$1000
Total Assets
$62,500
Total Equity
$6250
What is this bank’s ROA?
A) 1.6%
B) 10%
C) 12.8%
D) 16%
E) None of the above
106. Harrison Bank has the following financial information.
Net Profit Margin
12.5%
Net Income
$1000
Total Assets
$62,500
Total Equity
$6250
What is this bank’s ROE?
A) 1.6%
B) 10 %
C) 12.8%
D) 16%
E) None of the above
107. Harrison Bank has the following financial information.
Net Profit Margin
12.5%
Net Income
$1000
Total Assets
$62,500
Total Equity
$6250
What is this bank’s Equity Multiplier
A) 1.6 times
B) 10 times
C) 12.8 times
D) 16 times
E) None of the above
108. Harrison Bank has the following financial information.
ROE
16%
Net Income
$1000
Total Assets
$62,500
Total Equity
$6250
What is this bank’s asset utilization ratio?
A) 1.6%
B) 10%
C) 12.8%
D) 16%
E) None of the above
109. Harrison Bank has the following financial information.
Net Profit Margin
12.5%
Net Income
$1000
Total Assets
$62,500
Total Equity
$6250
What is this bank’s total operating revenue?
A) $125
B) $8000
C) $488,281
D) $31,250,000
E) None of the above
110. Which assets are excluded from risk assets?
A) Real Estate Loans
B) Commercial Paper
C) Plant and Equipment
D) Commercial and Industrial Loans
E) All of the above are risk assets