Banking Strategy and Management Review Questions
Course Introduction
Banking Strategy and Management explores the principles and practices that drive the competitive positioning and operational effectiveness of banks and financial institutions. This course examines strategic planning, risk management, product development, customer relationship management, and regulatory compliance within the banking sector. Students will analyze industry trends, the impact of technological innovation, and the changing landscape of global financial markets. Through case studies and real-world examples, participants will develop critical skills in strategic decision-making, performance assessment, and leadership necessary for effective management in modern banking environments.
Recommended Textbook
Bank Management 7th Edition by Timothy W. Koch
Available Study Resources on Quizplus
17 Chapters
910 Verified Questions
910 Flashcards
Source URL: https://quizplus.com/study-set/3638
Page 2
Chapter 1: Banking and the Financial Services Industry
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/72310
Sample Questions
Q1) ___-corporations have favorable tax treatment because a qualifying firm does not pay corporate income taxes.
A)C
B)Q
C)S
D)V
E)Z
Answer: C
Q2) An independent bank operates a single organization that accepts deposits and makes loans.
A)True
B)False
Answer: True
Q3) Which of the following is not a channel for delivering banking services?
A)Mobile banking.
B)Online banking.
C)Automated Teller Machines.
D)Branch banking.
E)Retail banking.
Answer: E
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Government Policies and Regulation
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/72311
Sample Questions
Q1) A primary purpose of maintaining the safety and soundness of banks is to:
A)encourage loan growth.
B)protect depositors.
C)ensure liquidity for the stock market.
D)prevent discrimination.
E)minimize bank losses.
Answer: B
Q2) The _________ established to Public Company Oversight Board to regulate public accounting firms that audit publicly-traded companies.
A)Riegle-Neal Interstate Banking and Branching Efficiency Act
B)Competitive Equality Banking Act
C)Financial Institutions Reform, Recovery and Enforcement Act
D)Sarbanes-Oxley Act
E)Depository Institutions Deregulation and Monetary Control Act
Answer: D
Q3) Most banks have the ability to easily raise new capital by issuing new equity.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Analyzing Bank Performance
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/72312
Sample Questions
Q1) A bank that deals primarily with commercial customers is called:
A)an Edge Act bank.
B)a retail bank.
C)a wholesale bank.
D)a uniform bank.
E)a liability bank.
Answer: C
Q2) Bank assets fall into each of the following categories except: A)loans.
B)investment securities.
C)demand deposits.
D)noninterest cash and due from banks.
E)other assets.
Answer: C
Q3) Balance sheet items are calculated for a particular point in time.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Managing Noninterest Income and Noninterest Expense
Available Study Resources on Quizplus for this Chatper
35 Verified Questions
35 Flashcards
Source URL: https://quizplus.com/quiz/72313
Sample Questions
Q1) Discuss why the net interest margin for banks has generally been declining for the past several years.
Q2) 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
Q3) Return on risk-adjusted capital is defined as:
A)Income/Allocated Risk Capital.
B)Allocated Risk Capital/Adjusted Income.
C)(Risk - Adjusted Income)/Capital.
D)Capital/Allocated Risk Capital.
E)Expenses + Target Profit.
Q4) Discuss why non-interest income has become more important to a bank's profitability since deregulation in the 1980's.
Q5) Discuss two ways that a bank can decrease its non-interest expense.
Q7) Discuss two ways that a bank can increase its non-interest income. Page 6
Q6) Discuss how bank's can reduce the number of unprofitable customers.
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 5: The Performance of Nontraditional Banking Companies
Available Study Resources on Quizplus for this Chatper
40 Verified Questions
40 Flashcards
Source URL: https://quizplus.com/quiz/72314
Sample Questions
Q1) BMW bank has more financial leverage than its peers.
A)True
B)False
Q2) Under FASB 157, Level _______ assets valuation are based on observable market prices for the identical instrument.
A)1
B)2
C)3
D)4
E)5
Q3) If a firm already has stock outstanding that is publically traded, additional offerings are called:.
A)initial public offering.
B)second time equity offering.
C)primary offering.
D)secondary offering.
E)flavored offering.
Q4) Mortgage origination makes up the largest portion of Goldman Sachs' business.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 6: Pricing Fixed-Income Securities
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/72315
Sample Questions
Q1) 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
Q2) If a bond is selling at par value, 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.
Q3) Discuss why the effective annual rate will never be less than the simple interest rate.
Q4) A bank quotes you a rate of 7% on a CD, compounded quarterly.What is the effective annual rate?
A)6.79%
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 7: Managing Interest Rate Risk: Gap and Earnings Sensitivity
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/72316
Sample Questions
Q1) If a bank expects interest rates to increase in the coming year, it should:
A)increase its GAP.
B)issue fewer variable rate loans.
C)issue more 3-month CDs.
D)issue more fixed rate loans.
E)become more liability sensitive.
Q2) If rate-sensitive assets equal $600 million and rate-sensitive liabilities equals $800 million, what is the expected change in net interest income if rates fall by 1%?
A)Net interest income will increase by $2 million.
B)Net interest income will fall by $2 million.
C)Net interest income will increase by $20 million.
D)Net interest income will fall by $20 million.
E)Net interest income will be unchanged.
Q3) Discuss the similarities and differences between earnings sensitivity analysis and income statement GAP analysis.
Q4) Discuss the statement "The relationship between GAP and net interest income is too simplistic."
Q5) Discuss the difference between a bank's periodic and cumulative GAP.
Q6) Discuss three factors that affect net interest income.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 8: Managing Interest Rate Risk: Economic Value of Equity
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/72317
Sample Questions
Q1) What are the weaknesses of using static GAP analysis versus duration gap analysis?
A)Static GAP ignores the time value of money.
B)Static GAP ignores the cumulative impact of interest rate changes on a bank's risk profile.
C)Static GAP does not proscribe the treatment of demand deposits.
D)All of the above are weaknesses of using static GAP analysis versus duration gap analysis.
E)a.and b.
Q2) Which of the following would generally be considered price sensitive?
A)Fed funds purchased
B)Fed funds sold
C)Repurchase agreements
D)Demand deposits
E)A 20-year zero coupon bond
Q3) How does effective duration differ from modified duration?
Q4) Discuss the differences between assets and liabilities that are price sensitive and those that are rate sensitive.
Q5) What are the strengths and weaknesses of duration gap analysis?
Q6) Why is it difficult to estimate the duration of demand deposits?
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 9: Using Derivatives to Manage Interest Rate Risk
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/72318
Sample Questions
Q1) Which of the following is not an advantage of the swap market over the futures market for managing interest rate risk?
A)Getting out of a contract is easier in the swap market.
B)With a swap contract, you can hedge away longer-term risks than with futures contracts.
C)The notional amount of the swap can be set to any value acceptable to both trading parties.
D)All of the above are advantages of the swap market over the futures market.
E)a.and c.are not advantages of the swap market over the futures market.
Q2) A bank can establish a floor on interest rate costs by:
A)buying a call option on Eurodollar futures.
B)selling Eurodollar futures contracts.
C)selling a call option on Eurodollar futures.
D)a.and b.
E)b.and c.
Q3) Discuss the difference between speculating and hedging.
Q4) Speculators take a position to reduce their risk profile.
A)True
B)False
Q5) Explain the concepts of cross hedging and basis risk.
Page 12
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Funding the Bank
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/72319
Sample Questions
Q1) Repurchase agreements generally carry a lower interest rate than comparable maturity Fed funds.
A)True
B)False
Q2) Interest costs do not equal the effective cost of bank liabilities because:
A)reserve requirements increase the effective cost.
B)there may be substantial processing costs.
C)service charges may offset a portion of non-interest expense.
D)all of the above.
E)a.and c.
Q3) A bank is going to issue $10,000,000 in 5-year par value bonds that pay a 5% annual coupon.The bank must pay .7% of the face value in floatation costs.What is the bank's effective cost of borrowing?
A)5.0%
B)5.2%
C)5.7%
D)6.2%
E)7.5%
Q4) Discuss the process of estimating the cost of deposit accounts.
Q5) What is the purpose of having a correspondent bank relationship?
Page 13
To view all questions and flashcards with answers, click on the resource link above.
Chapter 11: Managing Liquidity
Available Study Resources on Quizplus for this Chatper
40 Verified Questions
40 Flashcards
Source URL: https://quizplus.com/quiz/72320
Sample Questions
Q1) Correspondent banking services would include which of the following?
A)Check collection
B)Data processing services
C)Federal funds trading
D)all of the above
E)a.& c.only
Q2) Which of the following is a non-discretionary factor that will decrease a bank's daily reserves held at the Federal Reserve?
A)Deferred availability items
B)Receiving a discount window loan
C)Remittances charged
D)Excess balances at the local clearing house
E)Federal funds sold
Q3) The ease of converting an asset to cash with a minimum of loss is known as:
A)asset liquidity.
B)volatile liquidity.
C)core liquidity.
D)liability liquidity.
E)non-core liquidity.
Q4) Discuss the advantages and disadvantages of a bank holding less cash.
Page 14
To view all questions and flashcards with answers, click on the resource link above.
Chapter 12: The Effective Use of Capital
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/72321
Sample Questions
Q1) A bank that does not meet the minimum levels for Tier 1 capital, total capital, and leverage capital ratios is classified as:
A)well-capitalized.
B)adequately capitalized.
C)undercapitalized.
D)significantly undercapitalized.
E)critically undercapitalized.
Q2) Decreasing capital increases risk by decreasing financial leverage.
A)True
B)False
Q3) Under the current risk-based capital requirements, banks must hold capital against standby letters of credit they have issued as guarantees.
A)True
B)False
Q4) What is "moral hazard" and what is its impact on deposit insurance?
Q5) Smaller banks rely more heavily on internally generated capital than larger banks. A)True B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 15
Chapter 13: Overview of Credit Policy and Loan
Characteristics
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/72322
Sample Questions
Q1) Venture capital financing that comes in the "later rounds" of financing may take the form of:
A)start-up capital loans.
B)mezzanine financing.
C)automobile financing.
D)seed money.
E)staff financing.
Q2) What are the firm's estimated working capital needs?
A)$90
B)$540
C)$630
D)$1,170
E)$2,034
Q3) Which of the following is the primary emphasis of a values-driven credit culture?
A)Annual bank profit
B)Bank soundness and stability
C)Loan volume
D)Loan growth
E)Short-term earnings
Page 16
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: Evaluating Commercial Loan Requests and Managing Credit Risk
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/72323
Sample Questions
Q1) Next year, sales at Dylan are expected to increase by 10%.Also next year, the dividend payout ratio will not change, while gross profit, operating profit, net income, current assets and current liabilities will be the same percentage of sales as the current year.If the firm issues no new common stock, what will be the addition to retained earnings next year?
A)$1,112,000
B)$2,746,200
C)$3,200,000
D)$4,884,000
E)$5,372,400
Q2) Term loans are generally repaid with funds from:
A)investing cash flows.
B)issuing new debt.
C)reductions in inventory and receivables.
D)cash flows from operations.
E)redeeming marketable securities.
Q3) Every balance sheet and income statement item must be recognized on a cash-based income statement.
A)True
B)False
Page 17
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Evaluating Consumer Loans
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/72324
Sample Questions
Q1) If the loan quoted has an add-on rate, what is the approximate annual percentage rate (APR) on the loan?
A)20%
B)18%
C)14%
D)12%
E)10%
Q2) Which of the following are lenders prohibited from asking on a credit application?
A)The applicant's income
B)If the applicant has a telephone
C)If the applicant has declared bankruptcy in the past
D)How long the applicant has been on the job
E)Lenders are not prohibited from asking any of the above
Q3) Which of the following is a disadvantage of using a debit card?
A)The consumer is charged higher finance charges than on a credit card.
B)The consumer loses float.
C)They have higher processing costs than ATMs.
D)They have lower processing costs than checks.
E)They are not widely available.
To view all questions and flashcards with answers, click on the resource link above.
Page 18
Chapter 16: Managing the Investment Portfolio
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/72325
Sample Questions
Q1) A security might exhibit negative convexity because:
A)its duration is greater than its maturity.
B)it has a fixed interest rate below current market rates.
C)a bank has a negative GAP.
D)it has embedded options.
E)markets are not efficient.
Q2) The underlying mortgages in Ginnie Mae mortgage pools include:
A)Federal Housing Association (FHA) mortgages.
B)Veterans Administration (VA) mortgages.
C)privately issued mortgages.
D)all of the above
E)a.and b.only
Q3) A portfolio is equally invested in securities with 1-, 2-, and 3-years to maturity.Each year as the 1-year securities mature, the funds are reinvested in 3-year securities.This is an example of which investment strategy?
A)Barbell maturity strategy
B)Riding the yield curve
C)Laddered maturity strategy
D)Timing maturity strategy
E)Cycle maturity strategy
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 17: Global Banking Activities
Available Study Resources on Quizplus for this Chatper
35 Verified Questions
35 Flashcards
Source URL: https://quizplus.com/quiz/72326
Sample Questions
Q1) The Euro is not usable in wholesale financial transactions in:
A)France.
B)Germany.
C)Spain.
D)the United Kingdom.
E)Austria.
Q2) Non-performing international loans do not completely reflect potential losses because:
A)foreign governments have never defaulted on their debts.
B)banks often loan borrowers funds to make payments on existing loans.
C)U.S.banks can easily recover the funds in foreign courts.
D)the U.S.government has strongly discouraged U.S.banks from making international loans.
E)all of the above
Q3) A universal bank can engage in:
A)making commercial loans.
B)making consumer loans.
C)selling insurance.
D)all of the above
E)a.and b.only
To view all questions and flashcards with answers, click on the resource link above. Page 20