Homework Answers
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Statement 1 is true - Higher capital base provides a cushion to absorb losses. Hence regulators prefer higher capital requirements.
Statement 2 is false - Deposits are the least expensive source of financing, not capital.
Statement 3 is false - Higher capital reduces credit risk.
Statement 4 is false - Off-balance sheet commitments must be disclosed according to risk-based capital reporting requirements.
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1. 2. 3. Which of the following statements is true about capital requirements? Regulators prefer higher...
Which of the following statements is true about capital requirements? Group of answer choices Regulators prefer...
Which of the following statements is true about capital requirements? Group of answer choices Regulators prefer higher capital requirements because it provides an additional cushion to absorb losses. Bankers prefer higher capital because it is the least expensive source of financing. Higher capital requirements increase credit risk. Risk-based capital requirements allow banks ignore off-balance sheet commitments.
Question 10 question still Yes or No Question 6 2 pts Which of the following statements...
Question 10 question still Yes or No
Question 6 2 pts Which of the following statements is true about capital requirements? Regulators prefer higher capital requirements because it provides an additional cushion to absorb losses. Bankers prefer higher capital because it is the least expensive source of financing. Higher capital requirements increase credit risk. Risk-based capital requirements allow banks ignore off-balance sheet commitments. Question 7 2 pts Why can banks with greater equity financing borrow funds cheaper than other banks?...
Why can banks with greater equity financing borrow funds cheaper than other banks? Group of answer...
Why can banks with greater equity financing borrow funds cheaper than other banks? Group of answer choices Because they have proportionately more financial leverage and hence less risk. Because a greater proportion of their assets have to be in default before they fail. Because they have less credit risk. Because they have lower required reserves.
Why can banks with greater equity financing borrow funds cheaper than other banks? A.) Because they...
Why can banks with greater equity financing borrow funds cheaper than other banks? A.) Because they have proportionately more financial leverage and hence less risk. B.) Because a greater proportion of their assets have to be in default before they fail. C.) Because they have less credit risk. D.) Because they have lower required reserves.
Which of the following statements is true of the debt to equity ratio? A. The higher the debt to equity ratio, the gre...
Which of the following statements is true of the debt to equity ratio? A. The higher the debt to equity ratio, the greater the company's financial risk. B. If the debt to equity ratio is less than 1, the company is financing more assets with debt than with equity. C. If the debt to equity ratio is greater than 1, the company is financing more assets with equity than with debt. D. The higher the debt to equity ratio, the...
The main ways in which banks can meet countercyclical capital buffer requirements include: Reduce their voluntary...
The main ways in which banks can meet countercyclical capital buffer requirements include: Reduce their voluntary capital buffers, leaving overall capital ratios unchanged. Raise capital, through equity issues or higher retained earnings. Reduce risk-weighted assets, by reducing exposures (including lending). Rebalancing away from higher risk-weighted assets. All of the answers. Which of the following represent off-balance-sheet activities of commercial banks? A customer deposits $1 million in a regular bank deposit account. A customer chooses to transfer the deposit to a...
Question 1- Please choose the correct answer inside the bracket and copy it to your answer...
Question 1- Please choose the correct answer inside the bracket and copy it to your answer sheets (12 Marks) a. Given a bank's return on assets, the higher the bank capital, the (higher/lower) the return for the owners of the bank b. Greater flexibility in liability management has allowed banks to (increase/decrease) the proportion of their assets held in loans. C. In the absence of regulation, banks would probably hold too little capital, (increasing/ decreasing) the return on equity. d....
Which of the following statements about capital structure and the WACC is CORRECT? A. Since debt...
Which of the following statements about capital structure and the WACC is CORRECT? A. Since debt financing is cheaper than equity financing, raising a company’s debt ratio will always reduce its WACC. B. Increasing a company’s debt ratio will typically reduce the marginal cost of both debt and equity financing. However, this action still may raise the company’s WACC. C. Since debt financing raises the firm's financial risk, increasing a company’s debt ratio will always increase its WACC. D. Increasing...
Bank Y and Bank Z both have assets of $1 billion. The return on assets for...
Bank Y and Bank Z both have assets of $1 billion. The return on assets for both banks is the same. Bank Y has liabilities of $800 million while Bank Z's liabilities are $900 million. In which bank would you prefer to hold an equity stake? O Bank Z O Bank Y It depends on your preference for return versus risk Instructions: Enter your numeric responses as whole numbers. Explain your choice. If the two banks have $1 billion in...
Countercyclical capital buffers may be: Set higher by the bank regulator during periods of financial system...
Countercyclical capital buffers may be: Set higher by the bank regulator during periods of financial system stress and lower or even removed during subsequent periods of build-up of excessive credit systemic risk. Generally set above minimum Tier-1 capital ratios during periods of excessive private sector credit growth. Able to have some influence on dampening extremes in the credit cycle through their effect on overall funding costs although their primary role is to increase financial system resilience. None of the answers....
Question 10 question still Yes or No
Question 6 2 pts Which of the following statements is true about capital requirements? Regulators prefer higher capital requirements because it provides an additional cushion to absorb losses. Bankers prefer higher capital because it is the least expensive source of financing. Higher capital requirements increase credit risk. Risk-based capital requirements allow banks ignore off-balance sheet commitments. Question 7 2 pts Why can banks with greater equity financing borrow funds cheaper than other banks?...
Question 1- Please choose the correct answer inside the bracket and copy it to your answer sheets (12 Marks) a. Given a bank's return on assets, the higher the bank capital, the (higher/lower) the return for the owners of the bank b. Greater flexibility in liability management has allowed banks to (increase/decrease) the proportion of their assets held in loans. C. In the absence of regulation, banks would probably hold too little capital, (increasing/ decreasing) the return on equity. d....
Bank Y and Bank Z both have assets of $1 billion. The return on assets for both banks is the same. Bank Y has liabilities of $800 million while Bank Z's liabilities are $900 million. In which bank would you prefer to hold an equity stake? O Bank Z O Bank Y It depends on your preference for return versus risk Instructions: Enter your numeric responses as whole numbers. Explain your choice. If the two banks have $1 billion in...
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