19 Jul I need to answer some questions
From a financial statement perspective, discuss how banks differ from non-financial companies.
2. What are the principal sources of risk facing a bank manager?
3. Discuss two ways that a bank can increase its noninterest income.
4. Discuss two ways that a bank can decrease its noninterest expense.
5. Why is knowing a bond’s duration useful?
6. Assuming all other factors are held constant, discuss how changes in each of the following impact a bond’s duration.
· Maturity
· Coupon Rate
· Market Rate
TRUE/FALSE
7. Duration is an elasticity measure that indicates the relative price sensitivity of different securities.
8. Retail banks deal primarily with commercial customers.
9. Deposit service charges are a stable source of bank revenue.
10. Community banks relied more on investment banking, relative to larger banks, to increase non-interest income.
11. Bond prices and interest rates move in the same direction.
12. The greater the compounding frequency, the higher the future value, everything else the same.
13. There is an inverse relationship between a bond’s duration and its price volatility
MULTIPLE CHOICE
14. Which of the following is not considered a non-interest expense?
a. Wages and salaries
b. Rent
c. Required reserves held at the Federal Reserve
d. Electricity
e. Employee benefits
15. For most banks, which of the following is the largest component of non-interest expense?
a. Personnel expenses
b. Rent
c. Required reserves held at the Federal Reserve
d. Electricity
e. Depreciation on buildings and equipment
16. From the following list, which two are the biggest contributors to non-interest income?
| Fiduciary Activities |
| Deposit Service Charges |
| Trading Revenue |
| Investment Banking |
| Insurance Commission Fees and Income |
| Other Non-Interest Income |
a. Fiduciary Activities & Deposit Service Charges
b. Trading Revenue & Investment Banking
c. Insurance Commission Fees and Income & Other Non-Interest Income
d. Depository Service Charges and Other Non-Interest Income
e. Fiduciary Activities and Investment Banking
17. If a bond is a discount bond, 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.
18. If a bond is a premium bond, 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.
19. If a bond is a par bond, 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.
f.
20. Which of the following is false?
a. As interest rates rise, bond prices rise, everything else the same.
b. Given an absolute change in interest rates, the percentage increase in a bond’s price will be greater than the percentage decrease, everything else the same.
c. Long-term bonds change proportionately more in price than short-term bonds for a given rate change, everything else the same.
d. A bond with a lower coupon will change more in price than a bond with a higher coupon, everything else the same.
e. A bond’s duration is a measure of its price elasticity.
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