Banks Have Attempted to Maintain Adequate Profit Levels by ________

question 56

Multiple Choice

Banks have attempted to maintain adequate profit levels by ________.

• A) making fewer riskier loans, such as commercial real estate loans
• B) pursuing new off-balance-sheet activities
• C) increasing reserve deposits at the Bank of Canada
• D) decreasing capital accounts

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Definitions:

Risk Premiums

The extra return expected by investors for holding a risky asset compared to a risk-free asset, as compensation for the additional risk.

Expected Return

The anticipated profit or loss from an investment, taking into account the potential outcomes and their probabilities.

SMB Beta

A measure used in the evaluation of stocks, indicating a stock's sensitivity to movements in the small minus big (SMB) factor, part of the Fama-French three-factor model.

HML Beta

A measure of sensitivity to the HML (High Minus Low) factor, part of the Fama-French three-factor model, indicating how much a stock's return is affected by the value premium.