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18. How do capital requirements constrain bank growth?a. By discouraging investments in Treasury securities.b. By disallowing the ownership of mortgage loans.c. By decreasing a bank’s net interest margin.d. By limiting the amount of new assets that a bank can acquire through debtfinancing.e. By reducing a bank’s CAMELS ratings.19. Which of the following is nota weakness of risk-based capital standards?Use the following information for questions 20 - 22.
A bank currently just meets its total capital requirements of 8%. The bank currentlyhas a dividend payout ratio of 35%. Assets are expected to grow at 5%.20. What is the required ROA to support the growth in assets?21. If the bank expects its ROA to be .45%, what is the maximum dividend payoutratio to support the increase in assets?22. If the bank expects its ROA to be .45% and the bank does notwish to change its dividend payout ratio from 35%, how much new equity capital (as a percent oftotal assets) must the bank issue to support the growth in assets?a.0.001075%b.0.01075%c.0.1075%d.1.075%e.10.75%23. For banks that have insufficient capital, which of the following is nota typical operating strategy to achieve capital adequacy?24. Which of the following is not
true regarding common stock?
25. Which of the following is a hybrid form of equity that efectively pays dividendsthat are tax deductible and is considered Tier 1 capital?26. For a bank with deficient capital ratios, which of the following actions could betaken to increase the capital ratios, holding everything else the same?a. Cut the bank's dividend payment. b. Increase the bank's burden.c. Repurchase the bank's common stock on the open market.d. Increase the bank's growth rate by making additional commercial loans.e. Reduce the bank's holdings of Treasury securities.