20 True/False questions. Click an answer to get instant feedback — score updates live.
1) A bank balance sheet must always balance: Assets = Liabilities + Equity.
2) Making a new loan always increases the money supply permanently.
3) The “toy” money multiplier ignores capital ratios, liquidity rules, and loan demand.
4) Net Interest Margin (NIM) ≈ (Interest income − Interest expense) ÷ Earning assets.
5) In this toy model, pre-tax ROA adds fee income (non-interest income) but ignores operating costs and taxes.
6) Raising deposit rates without raising loan rates will widen the bank’s NIM.
7) Equity (“capital”) is the first line of defense against losses — once it’s gone, creditors bear losses.
8) A lower share of uninsured deposits makes a bank more vulnerable to a run.
9) HQLA are High-Quality Liquid Assets (e.g., cash, Treasuries) that can be turned into cash quickly in stress.
10) A bigger positive duration gap means less interest-rate risk for the bank.
11) SVB (2023) failed largely due to big unhedged duration risk and concentrated uninsured deposits.
12) If a bank’s LCR is ≥ 100%, it guarantees the bank will not face liquidity problems in any scenario.
13) The FDIC deposit insurance limit is unlimited for all depositors at all banks.
14) Liquidity risk means a bank might have to sell assets at a loss or borrow expensively to meet withdrawals.
15) Interest-rate risk is lower when assets and liabilities reprice at very different speeds.
16) Capital ratios like CET1% are measured relative to risk-weighted assets, not total assets.
17) A diversified deposit base (many smaller, uncorrelated customers) increases run risk compared to a concentrated base.
18) Wholesale funding (repo/CP) is usually more stable than core deposits during stress.
19) Regulators use stress tests and resolution planning (“living wills”) to help ensure banks can survive shocks.
20) A bank with 0% equity can still operate safely as long as depositors don’t withdraw.