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Exam (elaborations)

FIN 324 Actual Exam Questions With Correct Detailed Answers Guaranteed Success.

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  • Course
  • FIN.
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  • FIN.

What are some risks banks take? - correct answer Market - Interest rates - Changes in values from changes in interest rates - Macroeconomic - outside of bank control Credit - Can the company afford to repay the loans (or interest) Operational - Tech b...

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  • September 8, 2024
  • 54
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • FIN.
  • FIN.
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RealGrades
FIN 324
What are some risks banks take? - correct answer Market

- Interest rates

- Changes in values from changes in interest rates

- Macroeconomic - outside of bank control



Credit

- Can the company afford to repay the loans (or interest)



Operational

- Tech breakdowns



Regulatory

- Not adhering to rules (how they have to behave)



Reputational

- Bank taking on a company that benefits shareholders but upheaves stockholders

A bank closing a public item for missing payments

Funding oil or guns productions



Legal

- Fines, penalties, possible shutdown



What are some maco risks a bank could take? - correct answer Political

- Political risks of the location you are in

,Country or Sovereign

- Understand the correlation of each different country



Economic



What are some additional firm specific risks? - correct answer · Interest Rate Risk
(ALM)



· Off-Balance Sheet

o Contingency liable

o Found in footnotes



· Liquidity

o Do I have enough assets turning into cash to repay liabilities when they are due, and can I do that
without stress



· Insolvency

o Value of my assets is lower than my liabilities



· Capital

o Not just equity



What is regulated? - correct answer Activities



Liquidity

- Liquidity Coverage Ratio

- Net Stable Funding Ratio



Capital - proportional to the risks it takes

,- Risk-Weighted Assets

- Not nominal value

- Tier I, Tier II, Tier III

- B rating 34-40 % default



How do banks make money? - correct answer Making money by taking risks

· By investing and buying risky things



Identify & Manage Risk, Not avoid risk

· Need to take risk to make money



What is the retail product set? - correct answer Consumer/Retail Deposits, Checking
Accounts



ATM, Online Banking



Loans: Credit Card, House, Car, Student



What is the wholesale product set? - correct answer Cash management



Treasury Services

- Derivative transactions to hedge rates



Loans



What are the two ways to extend credit? - correct answer Fixed rate loans &
Floating rate loans



Fixed Rate Loans - correct answer Cost of Funds

, Spread



(Net Interest Income) difference between what I take in and what I pay out to depositors

- What the loan accrues at and what is takes for me to get money



Floating Rate Loans - correct answer Index: SOFR - MAIN



Spread



(Earn over time)



Describe bank fees - correct answer Why fees? Receive the upfront before we do
something

· Lending

· Origination Fee

· Renewal Fee

· Commitment fee

- line of credit (needs revenue to offset the possibility of you sending)

· Waiver Fee



Product: Fees (clearing checks, maintaining accounts)



What is on a typical Commercial Bank Balance Sheet: Assets - correct answer Total
Assets:

· Cash

· Marketable Securities

· Loans

· PPE

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