LSU ECON 2035 FINAL LATEST
EXAM
If a bank has ___ rate-sensitive assets than liabilities, then ___ in interest
rates will increase bank profits.
A) more; a decline
B) more; an increase
C) fewer; an increase
D) fewer; a surge - ANSWERS-B) more; an increase
If a bank has ___ rate-sensitive assets than liabilities, a ___ in interest
rates will reduce bank profits, while a ___ in interest rates will raise
bank profits.
A) more; rise; decline
B) more; decline; rise
C) fewer; decline; decline
D) fewer; rise; rise - ANSWERS-B) more; decline; rise
If a bank's liabilities are more sensitive to interest rate movements than
are its assets, then
A) an increase in interest rates will reduce bank profits
B) a decrease in interest rates will reduce bank profits
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1
, LSU ECON 2035 FINAL LATEST
EXAM
C) interest rates changes will not impact bank profits
D) an increase in interest rates will increase bank profits - ANSWERS-
A) an increase in interest rates will reduce bank profits
If a bank has $50 million in rate-sensitive assets and $20 million in rate-
sensitive liabilities then
A) an increase in interest rates will reduce bank profits
B) a decrease in interest rates will reduce bank profits
C) interest rate changes will not impact bank profits
D) a decrease in interest rates will increase bank profits - ANSWERS-B)
a decrease in interest rates will reduce bank profits
The difference of rate-sensitive liabilities and rate-sensitive assets is
known as the
A) duration
B) interest-sensitivity index
C) rate-risk index
D) gap - ANSWERS-D) gap
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PAGE
2
, LSU ECON 2035 FINAL LATEST
EXAM
If interest rates rise by 5 percentage points, say, from 10 to 15%, bank
profits (measured using gap analysis) will
A) decline by $0.5 million
B) decline by $1.5 million
C) decline by $2.5 million
D) increase by $1.5 million - ANSWERS-B) decline by $1.5 million
Examples of off-balance-sheet activities include
A) loan sales
B) extending loans to depositors
C) borrowing from other banks
D) selling negotiable CDs - ANSWERS-A) loan sales
Banks earn profits from off-balance sheet loan sales
A) by foreclosing on delinquent accounts
B) by selling the loans at discounted prices
C) by selling existing loans for more than the original loan amount
D) by calling-in loans before the maturity date - ANSWERS-C) by
selling existing loans for more than the original loan amount
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3
, LSU ECON 2035 FINAL LATEST
EXAM
All of the following are examples of off-balance sheet activities that
generate fee income for banks except
A) foreign exchange trades
B) guaranteeing debt securities
C) back-up lines of credit
D) selling negotiable CDs - ANSWERS-D) selling negotiable CDs
Which of the following is not an example of a backup line of credit?
A) loan commitments
B) overdraft privileges
C) standby letters of credit
D) mortgages - ANSWERS-D) mortgages
Off-balance sheet activities involving guarantees of securities and back-
up credit lines
A) have no impact on the risk a bank faces
B) greatly reduce the risk a bank faces
C) increase the risk a bank faces
END OF
PAGE
4
EXAM
If a bank has ___ rate-sensitive assets than liabilities, then ___ in interest
rates will increase bank profits.
A) more; a decline
B) more; an increase
C) fewer; an increase
D) fewer; a surge - ANSWERS-B) more; an increase
If a bank has ___ rate-sensitive assets than liabilities, a ___ in interest
rates will reduce bank profits, while a ___ in interest rates will raise
bank profits.
A) more; rise; decline
B) more; decline; rise
C) fewer; decline; decline
D) fewer; rise; rise - ANSWERS-B) more; decline; rise
If a bank's liabilities are more sensitive to interest rate movements than
are its assets, then
A) an increase in interest rates will reduce bank profits
B) a decrease in interest rates will reduce bank profits
END OF
PAGE
1
, LSU ECON 2035 FINAL LATEST
EXAM
C) interest rates changes will not impact bank profits
D) an increase in interest rates will increase bank profits - ANSWERS-
A) an increase in interest rates will reduce bank profits
If a bank has $50 million in rate-sensitive assets and $20 million in rate-
sensitive liabilities then
A) an increase in interest rates will reduce bank profits
B) a decrease in interest rates will reduce bank profits
C) interest rate changes will not impact bank profits
D) a decrease in interest rates will increase bank profits - ANSWERS-B)
a decrease in interest rates will reduce bank profits
The difference of rate-sensitive liabilities and rate-sensitive assets is
known as the
A) duration
B) interest-sensitivity index
C) rate-risk index
D) gap - ANSWERS-D) gap
END OF
PAGE
2
, LSU ECON 2035 FINAL LATEST
EXAM
If interest rates rise by 5 percentage points, say, from 10 to 15%, bank
profits (measured using gap analysis) will
A) decline by $0.5 million
B) decline by $1.5 million
C) decline by $2.5 million
D) increase by $1.5 million - ANSWERS-B) decline by $1.5 million
Examples of off-balance-sheet activities include
A) loan sales
B) extending loans to depositors
C) borrowing from other banks
D) selling negotiable CDs - ANSWERS-A) loan sales
Banks earn profits from off-balance sheet loan sales
A) by foreclosing on delinquent accounts
B) by selling the loans at discounted prices
C) by selling existing loans for more than the original loan amount
D) by calling-in loans before the maturity date - ANSWERS-C) by
selling existing loans for more than the original loan amount
END OF
PAGE
3
, LSU ECON 2035 FINAL LATEST
EXAM
All of the following are examples of off-balance sheet activities that
generate fee income for banks except
A) foreign exchange trades
B) guaranteeing debt securities
C) back-up lines of credit
D) selling negotiable CDs - ANSWERS-D) selling negotiable CDs
Which of the following is not an example of a backup line of credit?
A) loan commitments
B) overdraft privileges
C) standby letters of credit
D) mortgages - ANSWERS-D) mortgages
Off-balance sheet activities involving guarantees of securities and back-
up credit lines
A) have no impact on the risk a bank faces
B) greatly reduce the risk a bank faces
C) increase the risk a bank faces
END OF
PAGE
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