1、Chapter 24Risk Management in Financial Institutions Multiple Choice Questions1. Banks face the problem of _ in loan markets because bad credit risks are the ones most likely to seek bank loans.(a) adverse selection(b) moral hazard(c) moral suasion(d) intentional fraudAnswer: A2. If borrowers with th
2、e most risky investment projects are more likely to seek bank loans than borrowers with the safest investment projects, banks face the problem of(a) adverse credit risk.(b) adverse selection.(c) moral hazard.(d) conflict of interest.Answer: B3. Because borrowers, once they have a loan, are more like
3、ly to invest in high-risk investment projects, banks face the(a) adverse selection problem.(b) lemon problem.(c) adverse credit risk problem.(d) moral hazard problem.Answer: D4. Banks attempts to solve adverse selection and moral hazard problems help explain loan management principles such as(a) scr
4、eening and monitoring of loan applicants.(b) collateral and compensating balances.(c) credit rationing.(d) all of the above.(e) only (a) and (b) of the above.Answer: D302 Mishkin/Eakins Financial Markets and Institutions, Fifth Edition5. In one sense, _ appears surprising since it means that the ban
5、k is not _ its portfolio of loans and thus is exposing itself to more risk.(a) specialization in lending; diversifying(b) specialization in lending; rationing(c) credit rationing; diversifying(d) screening; rationingAnswer: A6. From the standpoint of _, specialization in lending is surprising but ma
6、kes perfect sense when one considers the _ problem.(a) moral hazard; diversification(b) diversification; moral hazard(c) adverse selection; diversification(d) diversification; adverse selectionAnswer: D7. Provisions in loan contracts that proscribe borrowers from engaging in specified risky activiti
7、es are called(a) proscription bonds.(b) collateral clauses.(c) restrictive covenants.(d) liens.Answer: C8. Banks attempt to screen good from bad credit risks to reduce the incidence of loan defaults. To do this, banks(a) specialize in lending to certain industries or regions.(b) write restrictive co
8、venants into loan contracts.(c) expend resources to acquire accurate credit histories of their potential loan customers.(d) do all of the above.Answer: D9. A banks commitment (for a specified future period of time) to provide a firm with loans up to a given amount at an interest rate that is tied to
9、 a market interest rate is called(a) credit rationing.(b) a line of credit.(c) continuous dealings.(d) none of the above.Answer: B10. Lines of credit and long-term relationships between banks and their customers(a) reduce the costs of information collection.(b) make it easier for banks to screen goo
10、d from bad risks.(c) enable banks to deal with moral hazard contingencies that are neither anticipated nor specified in restrictive covenants.(d) do all of the above.(e) do only (a) and (b) of the above.Chapter 24 Risk Management in Financial Institutions 303Answer: D304 Mishkin/Eakins Financial Mar
11、kets and Institutions, Fifth Edition11. Compensating balances(a) are a particular form of collateral commonly required on commercial loans.(b) are a required minimum amount of funds that a borrower (i.e., a firm receiving a loan) must keep in a checking account at the bank.(c) allow banks to monitor
12、 firms check payment practices which can yield information about their borrowers financial conditions.(d) all of the above.Answer: D12. A bank that wants to monitor the check payment practices of its commercial borrowers, so that moral hazard can be prevented, will require borrowers to(a) place a ba
13、nk officer on their board of directors.(b) place a corporate officer on the banks board of directors.(c) keep compensating balances in a checking account at the bank.(d) do all of the above.(e) do only (a) and (b) of the above.Answer: C13. Of the following methods that banks might use to reduce mora
14、l hazard problems, the one not legally permitted in the United States is the requirement that(a) firms keep compensating balances at the banks from which they obtain their loans.(b) firms place on their board of directors an officer from the bank.(c) loan contracts include restrictive covenants.(d)
15、individuals provide detailed credit histories to bank loan officers.Answer: B14. When a lender refuses to make a loan, although borrowers are willing to pay the stated interest rate or even a higher rate, it is said to engage in(a) constrained lending.(b) strategic refusal.(c) credit rationing.(d) c
16、ollusive behavior.Answer: C15. When a lender refuses to make a loan, even though borrowers are willing to pay the stated interest rate or even a higher rate, it is said to engage in(a) specialized lending.(b) strategic refusal.(c) diversified lending.(d) coercive behavior.(e) none of the above.Answe
17、r: EChapter 24 Risk Management in Financial Institutions 30516. Credit rationing occurs when a bank(a) refuses to make a loan of any amount to a borrower, even when she is willing to pay a higher interest rate.(b) restricts the amount of a loan to less than the borrower would like.(c) does either (a
18、) or (b) of the above.(d) does neither (a) nor (b) of the above.Answer: C17. Because larger loans create greater incentives for borrowers to engage in undesirable activities that make it less likely they will repay the loans, banks(a) ration credit, granting borrowers smaller loans than they have re
19、quested.(b) ration credit, charging higher interest rates to borrowers who want large loans than to those who want small loans.(c) ration credit, charging higher fees as a percentage of the loan to borrowers who want large loans than to those who want small loans.(d) do none of the above.Answer: A18
20、. When banks offer borrowers smaller loans than they have requested, banks are said to(a) shave credit.(b) discount the loan.(c) raze credit.(d) ration credit.Answer: D19. Which of the following are not rate-sensitive assets?(a) Securities with a maturity of less than one year.(b) Variable-rate mort
21、gages.(c) Fixed-rate mortgages.(d) All of the above are rate-sensitive assets.(e) None of the above is a rate-sensitive asset.Answer: C20. Liabilities that are partially, but not fully, rate-sensitive include(a) checkable deposits.(b) federal funds.(c) non-negotiable CDs.(d) fixed-rate mortgages.(e)
22、 money market deposit accounts.Answer: A21. If a bank has more rate-sensitive liabilities than rate-sensitive assets, then a(n) _ in interest rates will _ bank profits.(a) increase; increase(b) increase; reduce(c) decline; reduce(d) decline; not affect306 Mishkin/Eakins Financial Markets and Institu
23、tions, Fifth EditionAnswer: BChapter 24 Risk Management in Financial Institutions 30722. If a bank has more rate-sensitive assets than rate-sensitive liabilities, then a(n) _ in interest rates will _ bank profits.(a) increase; increase(b) increase; reduce(c) decline; increase(d) decline; not affectA
24、nswer: A23. If a bank has _ rate-sensitive assets than rate-sensitive liabilities, then a(n) _ in interest rates will increase bank profits.(a) more; decline(b) more; increase(c) less; increase(d) both (a) and (c)Answer: B24. The difference between rate-sensitive liabilities and rate-sensitive asset
25、s is known as the(a) duration.(b) interest-sensitivity index.(c) interest-rate risk index.(d) gap.Answer: DTable 24.1First National BankAssets LiabilitiesRate-sensitive $20 million $50 millionFixed-rate $80 million $40 million25. Referring to Table 24.1, First National Bank has a gap of _.(a) 30(b)
26、+30(c) 60(d) 0Answer: A26. Referring to Table 24.1, if interest rates rise by 5 percentage points, then 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.Answer: B308 Mishkin/Eakins Financia
27、l Markets and Institutions, Fifth Edition27. Refer to Table 24.1. Assuming that the average duration of its assets is five years, while the average duration of its liabilities is three years, a rise in interest rates from 5 percent to 10 percent will cause the net worth of First National to _ by _ o
28、f the total original asset value.(a) increase; 11 percent(b) decline; 11 percent(c) increase; 10 percent(d) decline; 5 percentAnswer: BTable 24.2First National BankAssets LiabilitiesRate-sensitive $40 million $50 millionFixed-rate $60 million $40 million28. Referring to Table 24.2, First National Ba
29、nk has a gap of _.(a) 10(b) 10(c) 20(d) 0Answer: A29. Referring to Table 24.2, if interest rates rise by 5 percentage points, then 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 $2.0 million.Answer: A
30、30. Refer to Table 24.2. Assuming that the average duration of the banks assets is four years, while the average duration of its liabilities is three years, a rise in interest rates from 5 percent to 10 percent will cause the net worth of First National to _ by _ of the total original asset value.(a
31、) decline; 5 percent(b) decline; 1.3 percent(c) decline; 6.2 percent(d) increase; 5 percentAnswer: CChapter 24 Risk Management in Financial Institutions 30931. If First State Bank has a gap equal to a positive $20 million, then a 5 percentage point drop in interest rates will cause profits to(a) inc
32、rease by $10 million.(b) increase by $1.0 million.(c) decline by $10 million.(d) decline by $1.0 million.Answer: D32. If First National Bank has a gap equal to a negative $30 million, then a 5 percentage point increase in interest rates will cause profits to(a) increase by $15 million.(b) increase b
33、y $1.5 million.(c) decline by $15 million.(d) decline by $1.5 million.Answer: D33. Measuring the sensitivity of bank profits to changes in interest rates by multiplying the gap times the change in the interest rate is called(a) basic duration analysis.(b) basic gap analysis.(c) interest-exposure ana
34、lysis.(d) gap-exposure analysis.Answer: B34. Measuring the sensitivity of bank profits to changes in interest rates by multiplying the gap for several maturity subintervals by the change in the interest rate is called(a) basic gap analysis.(b) the segmented maturity approach to gap analysis.(c) the
35、maturity bucket approach to gap analysis.(d) the segmented maturity approach to interest-exposure analysis.(e) none of the above.Answer: C35. Duration gap analysis(a) is a refinement of basic gap analysis that accounts for interest-rate changes over a multiyear period.(b) is a refinement of basic ga
36、p analysis that accounts for how long a gap will last.(c) is a complement to basic gap analysis that accounts for the effect of interest rate changes on market value.(d) is a complement to basic gap analysis that accounts for the influence of partially rate-sensitive assets.Answer: C310 Mishkin/Eaki
37、ns Financial Markets and Institutions, Fifth Edition36. Duration analysis involves comparing the average duration of the banks _ to the average duration of its _(a) securities portfolio; non-deposit liabilities.(b) loan portfolio; non-deposit liabilities.(c) loan portfolio; deposit liabilities.(d) r
38、ate-sensitive assets; rate-sensitive liabilities.(e) assets; liabilities.Answer: E37. To use the concept of duration to analyze the effect of changes in interest rates on the market value of an asset, a bank manager would multiply(a) the negative of the duration of the asset by the change in the int
39、erest rate, i.(b) the negative of the duration of the asset by i /(1 + i).(c) the duration of the asset by the change in the interest rate, i.(d) the duration of the asset by i /(1 + i).Answer: B38. If a bank has a duration gap of 2 years, then a rise in interest rates from 6 percent to 9 percent wi
40、ll lead to(a) a rise in the market value of its net worth of 5.66 percent.(b) a rise in net interest income of 5.66 percent.(c) a fall in the market value of its net worth of 5.66 percent.(d) a fall in net interest income of 5.66 percent.(e) an unknown change.Answer: C39. If a bank has a duration ga
41、p of 2 years, then a fall in interest rates from 6 percent to 3 percent will lead to(a) a rise in the market value of its net worth of 5.66 percent.(b) a fall in the market value of its net worth of 5.66 percent.(c) a rise in net interest income of 5.66 percent.(d) a fall in net interest income of 5
42、.66 percent.(e) an unknown change.Answer: A40. If a decline in interest rates causes the market value of a banks net worth to rise, then the bank must have a(a) negative duration gap.(b) positive duration gap.(c) negative gap.(d) positive gap.Answer: BChapter 24 Risk Management in Financial Institut
43、ions 31141. If a rise in interest rates causes the market value of a banks net worth to rise, then the bank must have a(a) negative duration gap.(b) positive duration gap.(c) negative gap.(d) positive gap.Answer: A42. One problem with duration gap analysis is that it(a) is calculated assuming that t
44、he yield curve is flat.(b) is calculated assuming that the yield curve does not change.(c) does not measure the sensitivity of net worth to interest rate changes.(d) does not measure the sensitivity of income to interest rate changes.(e) applies only to financial institutions.Answer: A43. One proble
45、m with basic gap analysis is that it(a) is calculated assuming interest rates on all maturities are equal.(b) is calculated assuming interest rates on all maturities change by equal amounts.(c) measures the sensitivity of net worth to interest rate changes.(d) does not measure the sensitivity of inc
46、ome to interest rate changes.(e) applies only to financial institutions.Answer: B44. A bank manager concerned about interest income who expects interest rates to rise and who knows the bank currently has a positive gap should _ rate-sensitive assets and _rate-sensitive liabilities.(a) increase; incr
47、ease(b) decrease; increase(c) decrease; decrease(d) increase; decreaseAnswer: D45. A bank manager concerned about interest income who expects interest rates to fall and who knows the bank currently has a positive gap should _ rate-sensitive assets and _rate-sensitive liabilities.(a) increase; increa
48、se(b) decrease; increase(c) decrease; decrease(d) increase; decreaseAnswer: B312 Mishkin/Eakins Financial Markets and Institutions, Fifth Edition True/False1. If a bank has more rate-sensitive liabilities than assets, then an increase in interest rates will reduce bank profits.Answer: TRUE2. The dif
49、ference between rate-sensitive liabilities and rate-sensitive assets is known as the duration gap.Answer: FALSE3. If a bank has a negative gap, then a decrease in interest rates will increase income.Answer: TRUE4. Banks face the problem of adverse selection in loan markets because bad credit risks are the ones most likely to seek bank loans.Answer: TRUE5. Due-on-sale clauses in loan c
