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(ECON612)EC612FE2007.pdf
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Final Exam
Economics 612A
Banking and International Finance
March 28, 2007

Multiple Choice (2 points each)

1.
Bank assets fall into each of the following categories except:


a.
loans.


b.
investment securities.


c.
demand deposits.


d.
noninterest cash and due from banks.

______________




2.
Banks generate their largest portion of income from:


a.
loans.


b.
short-term investment.


c.
demand deposits.


d.
long-term investments.


e.
certificates of deposit.

______________





3.
Core deposits consist of all of the following except:


a.
demand deposits.


b.
Small time deposits


c.
Subordinated debt


d.
savings accounts.

______________





4.
Net income is defined as:


a.
Net interest income C burden + provision for loan loss + securities gains or losses C taxes.


b.
Net interest income + burden + provision for loan loss + securities gains or losses C taxes.


c.
Net interest income C burden C provision for loan loss + securities gains or losses C taxes.


d.
Net interest income C burden C provision for loan loss + securities gains or losses + taxes.


e.
Net interest income + burden C provision for loan loss + securities gains or losses C taxes.





______________



5.
For a bank that has a negative duration gap, a decrease in interest rates will cause a(n) _______ in the economic value of assets, a(n) _______ in the economic value of liabilities, and a(n) _______ in the economic value of equity.


a.
increase, decrease, increase


b.
increase, increase, decrease


c.
increase, increase, increase


d.
decrease, decrease, increase


e.
decrease, increase, decrease

______________





6.
If a bond is selling at a premium, then:


a.
the yield to maturity is less than the coupon rate.


b.
the yield to maturity is greater than the coupon rate.


c.
the yield to maturity is equal to the coupon rate.


d.
its duration must be greater than its maturity.


e.
its duration must be equal to its maturity.

______________





7.
A bank buys a $10,000 Treasury bill with a maturity of 1 year. Current market rates are 8%. If interest rates rise to 8.25%, what is the approximate change in the price of the T-bill?


a.
-0.02%


b.
-0.23%


c.
-2.31%


d.
-23.15%


e.
-231.15%

______________





8.
Which of the following is not part of the CAMELS ratings?


a.
Capital adequacy.


b.
Asset quality.


c.
Earnings quality.


d.
Liabilities quality.


e.
Sensitivity to market risk.

______________





9.
Assume that uncovered interest parity and the expectations theory of the term structure are true. The yield on 1 year HK dollar bonds is 5% and the yield on 1 year Singapo