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Unformatted text preview: FRL 315 Chapter 19 Practice Problems 1. Which of the following statements is incorrect? A) Managers may be tempted to make decisions that are in their own best interests rather than shareholder interests. B) The compensation of bank loan officers may be tied to loan volume, which encourages a loan department to extend loans with a very high concern for risk. C) To prevent agency problems, some banks provide stock as compensation to managers. D) The underlying goal behind the managerial policies of a bank is to maximize the wealth of the bank’s shareholders. 2. Banks can resolve cash deficiencies by A) creating additional liabilities. B) selling assets. C) buying back common stock. D) increasing dividend payouts. E) A or B 3. During a period of rising interest rates, a bank’s net interest margin will likely ______ if its liabilities are ______ its assets. A) increase; more rate-sensitive than B) decrease; more rate-sensitive than C) increase; equally rate-sensitive as D) decrease; equally rate-sensitive as 4. If a bank expected interest rates to consistently ___________ over time, it will consider allocating 4....
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This document was uploaded on 08/05/2011.
- Spring '09