Answer False When constructing ratios average balance sheet data should be used

Answer false when constructing ratios average balance

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Answer: False
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When constructing ratios, average balance sheet data should be used.Answer: True191.Balance sheet items are calculated for a particular point in time.Answer: True192.Regarding interest expense, volume effects suggest that the mix of liabilities among banks may differ.Answer: False193.Banks that use preferred stock understate their ROE relative to banks that do not use preferred stock.Answer: False194.Eliminating borrowing from the Federal Reserve at the end of fiscal year is anexample or “window dressing.”Answer: True195.Smaller banks generally employee fewer people per dollar of assets than larger banks.Answer: False196.Regarding interest expense, volume effects suggest that the mix of liabilities among banks may differ.Answer: False197.A bank holding company is a shell organization that owns subsidiary firm. Answer: True198.The Federal Reserve directly controls the discount rate.Answer: True199.The FDIC insures credit union accounts up to $250,000.Answer: FalseChapter 7Managing Interest Rate Risk: GAP and Earnings SensitivityMultiple Choice200.When is interest rate risk for a bank greatest?k.When interest rates are volatile.l.When interest rates are stable.m.When inflation is high.
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n.When inflation is low.o.When loan defaults are high.Answer: a201.Interest rate risk:f.varies inversely with a bank’s GAP.g.can be measured by the volatility of a bank’s net interest income given changes in the level of interest rates.h.can be eliminated by matching fixed rate assets with variable rate liabilities.i.rarely has an impact on bank earnings.j.All of the aboveAnswer: b 202.A bank’s GAP is defined as:k.the dollar amount of rate-sensitive assets divided by the dollar amount of rate-sensitive liabilities.l.the dollar amount of earning assets divided by the dollar amount of total liabilities.m.the dollar amount of rate-sensitive assets minus the dollar amount of rate-sensitive liabilities.n.the dollar amount of rate-sensitive liabilities minus the dollar amount of rate-sensitive assets.o.the dollar amount of earning assets times the average liability interest rate. Answer: ca.adjusting the dollar amount of rate-sensitive assets.b.adjusting the dollar amount of fixed-rate liabilities.c.using interest rate swaps.d.Bank can reduce volatility of net interest income by doing all of the above.e.Answer: e203.Keeping all other factors constant, banks can reduce the volatility of net interest income by:a. and c. only
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