Ho Chi Minh University of Banking

Faculty of Banking
Mid-term Exam
Course name: Bank Management
Time duration: 90 minutes

I. MULTIPLE CHOICE QUESTIONS (4 points)

1. The financial statements of a commercial bank include:
A. Balance Sheet, Income Statement, Statement of Changes in Equity, Cash Flow
Statement, and Notes to the Financial Statements.
B. Balance Sheet, Income Statement, Cash Flow Statement, and Notes to the Financial
Statements.
C. Balance Sheet, Income Statement, and Cash Flow Statement.
D. Balance Sheet, Cash Flow Statement, and Notes to the Financial Statements.
2. The main assets of commercial banks are:
A. Financial assets
B. Physical assets
C. Tangible assets
D. Intangible assets (Goodwill)
3. Who needs to analyze and evaluate the performance of commercial banks?
A. The Board of Directors and Executive Management of the bank
B. Credit rating agencies
C. Investors
D. All of the above
4. A commercial bank may have low ROA but high ROE because:
A. The bank uses its assets inefficiently.
B. The bank has low operating profitability.
C. The bank’s equity accounts for a small portion of total liabilities.
D. All of the above
5. Which key feature distinguishes commercial banks from other non-bank
financial institutions?
A. Having a diversified portfolio of services
B. Being required to maintain higher regulatory capital
C. Being the only institutions allowed to accept demand deposits and act as payment
intermediaries
D. All of the above
6. Return on Equity (ROE) depends on:
A. Equity Multiplier
B. Assets Utilization Ratio (AUR)
C. Net Profit Margin (NPM)
D. All of the above
7. Information about HDBank is as follows: In 20XY, total interest expense was
VND 20 trillion and total interest income was VND 35 trillion. The bank’s total
assets were VND 250 trillion, of which interest-earning assets accounted for 80%
of total assets. The Net Interest Margin (NIM) of the bank is:
A. 6%
B. 7.5%
C. 0.6%
D. 0.75%
8. A bank’s Total Operating Revenue includes:
A. Net interest income + Non-interest income
B. Interest income + Non-interest income + Gains/losses from securities trading
C. Interest income + Non-interest income
D. All of the above are incorrect
9. Conditions for an asset to be considered liquid:
A. It must be readily convertible into cash
B. Its price must be stable
C. It must allow the seller to repurchase it at an acceptable cost
D. All of the above
10. Which of the following statements is correct?
A. A commercial bank's liquidity is periodic
B. A commercial bank's liquidity needs mainly arise from internal sources
C. A commercial bank's liquidity demand is time-specific
D. All of the above are incorrect
11. Sources of liquidity supply may come from:
A. The bank invests in bonds.
B. Customers withdraw savings deposits.
C. The bank issues certificates of deposit.
D. The bank provides credit to customers.
12. A bank expects to have a net deposit outflow of -VND 5 billion (more
withdrawals than deposits). If the bank borrows to cover the liquidity shortfall,
the balance sheet status of the bank will be:
A. Total assets remain unchanged.
B. Total assets increase.
C. Total assets decrease.
D. Total liabilities increase.
13. Arrange the following asset items in order of decreasing liquidity:
(1) Government securities
(2) Loans
(3) Cash on hand
A. (1); (2); (3)
B. (2); (3); (1)
C. (3); (1); (2)
D. (2); (1); (3)
14. Which of the following items is a component of liquidity demand?
A. Loan repayments from customers
B. Income from service provision
C. Maturity payments on certificates of deposit (CDs)
D. Sale of fixed assets
15. Which of the following items is a source of liquidity for a bank?
A. Interest received from investment activities
B. Customers withdrawing savings deposits
C. Interest payments on interbank loans
D. Purchase of equipment for a new branch
16. In the event of a liquidity shortfall, what should the bank do?
A. Do nothing
B. Prepare additional funding sources
C. Increase investment activities
D. All of the above
17. The probability that a customer fails to meet payment (repayment) obligations on
time as committed is called:
A. Interest rate risk
B. Liquidity risk
C. Credit risk
D. Operational risk
18: Credit risk can result in:
A. Reduced bank income
B. Reduced bank profit
C. Increased non-performing loans (NPLs)
D. All of the above
19. A rise in non-performing loans (NPLs) can reduce bank profits because:
A. The bank must increase provisions for credit risk.
B. The bank must use provisions to cover non-performing loans.
C. The bank must record non-performing loans off the balance sheet.
D. All of the above
20: Credit risk can be limited or eliminated if the bank:
A. Has a good credit policy
B. Practices effective credit management (complying with principles, standards,
procedures...)
C. Has a well-structured loan portfolio
D. All of the above
II. EXERCISES (6 points)
1. A commercial bank has the following data: (Average annual data, Unit: million
USD)
 Assets Balance Interes Liabilities and equity Balance Interes
t rate t rate
Primary reserves 1.500 2% Short-term savings deposits 6.200 4%
Short-term bonds 1.800 5% Medium-term savings deposits 1.300 5%
Short-term loans 2.800 8% Long-term savings deposits 1000 7%
Medium and long-term loans 3.200 9% Short-term borrowings 800 8%
Other long-term investments 1.000 12% Medium and long-term borrowings 700 5%
Fixed assets 800 Equity 1100 0

Total assets 11.100 Total liabilities and equity 11.100

Assume that the interest rate decreases from 10% to 8% per year, while 50% of
medium- and long-term loans are subject to interest rate adjustments based on market
fluctuations.
a. Identify interest rate-sensitive assets and interest rate-sensitive liabilities.
b. When the interest rate decreases from 10% to 8% per year, will the bank face
interest rate risk? How much will the bank's net income increase (or decrease)?
c. If the interest rate increases from 10% to 12% per year, how much will the bank's
net income change?
2. A 5-year coupon bond with a coupon rate of 7,5% per year, face value 1000 USD,
market interest rate of 9% per year, and a bond duration of D = 3.89 years. Assume the
market interest rate increases by 10 basis point (0.1%), from 9% to 9.1%. Determine
the bond's market price.

3. Suppose a bank's balance sheet is as follows: (Unit: million dollars)

Assets Liabilities and Equity

Assets = 250 Liabilities L = 225

Equity E = 25

Total 250 Total 250

Currently, the bank has DA = 5.5 years, DL = 7 years. Suppose the interest rate
decreases immediately from 9%/year to 7.5%/year, how will the bank's net worth
change? What would be the result if the interest rate increases to 10.5%? Prepare the
bank balance sheet after adjusting the interest rate