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351 winter 2011 final 3


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Unformatted text preview: failures. C) that the CDIC guarantees all deposits when it uses the ʺpurchase and assumptionʺ method. D) that the CDIC guarantees all deposits when it uses the ʺpayoffʺ method. 2) Regulators attempt to reduce the riskiness of banksʹ asset portfolios by A) encouraging banks to hold risky assets such as common stocks. B) requiring collateral for all loans. C) establishing a minimum interest rate floor that banks can earn on certain assets. D) limiting the amount of loans in particular categories or to individual borrowers. 3) Large-denomination CDs are ________, so that like a bond they can be resold in a ________ market before they mature. A) negotiable; secondary B) nonnegotiable; primary C) nonnegotiable; secondary D) negotiable; primary Assets R e-sensitive $20 million at Fi xed-rate $80 million Liabilities $50 million $50 million 4) If interest rates rise by 5 percentage points, say, from 10 to 15%, bank profits (measured using gap analysis) will A) increase by $1.5 million. B) decline by $2.5 million. C) decl...
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