Question

First National Bank has assets that are more rate-sensitive than its liabilities. As interest rates rise, then we should expect the bank profits to:

	A.	Rise
	B.	Remain unchanged
	C.	Fall

The benefit of establishing a long-term relationship with your banker is to:

	A.	Reduce the likely of moral hazard
	B.	Diminish problems with asymmetric information
	C.	Improve loan terms for the customer
	D.	All of the above

One of our banks has three loan officers -- one officer handles home and personal loans, one officer handles commercial or business loans, and one officer handles agricultural loans. This practice is a form of credit risk management known as:

	A.	Restrictive covenants
	B.	Screening
	C.	Specialization in lending

Answer 1

1.A.Rise
The profits will rise, as assets appreciate due to the increase in rates , will lead to the credit side of the profit and loss account as appreciation of asset

2.B. All of the above
All thyese options are benefits a customer enjoys when they have a good relationship with the banker.

3. C Specialization in lending
It is known as Specialization in lending and is often used to judge risks and reward of loans in a particular set in a better manner.

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