Question 1: If you are a banker and expect interest rates to rise in the future, would you want to make short-term or long-term loans?
Question 2: If a bank doubles the amount of its capital and ROA stays constant, what will happen to ROE?
Question 3: If a bank is falling short of meeting its capital requirements by $1 million, what three things can it do to rectify the situation?
Question 4: X-band reported an ROE of 15% and an ROA of 1%. How well capitalized is this bank?
Question 5. What are the costs and benefits of a too-big-to-fail policy?
Question 6. Why does imposing bank capital requirements on banks help limit risk taking?
Question 7: Consider a failing bank. A deposit of $150,000 is worth how much if the FDIC uses the payoff method? The purchase and assumption method? Which is more costly to taxpayers?
Question 8: Consider a bank with the following balance sheet:
Assets Liabilities
Required reserves $8 million Checkable deposits $100 million
Excess reserves $3 million Bank capital $6 million
T-bills $45 million
Mortgages $40 million
Commercial loans $10 million
Calculate the bank’s risk-weighted assets?