The Objective of Bank Management Is to

question 173

Multiple Choice

The objective of bank management is to

• A)maximize stockholders' profits by making risky investments and giving loans to borrowers who will pay the highest interest rates.
• B)refuse to make risky loans and make loans only to the safest borrowers.
• C)invest in the U.S.government securities and make loans only to established businesses.
• D)strike the appropriate balance between the attraction of bank profits and the need for bank safety.

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Definitions:

Internal Rate

Often referring to the Internal Rate of Return (IRR), it's the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Cash Flows

The total amount of money being transferred into and out of a business, especially as affecting liquidity.

Outlay

The amount of money spent on a particular expense or investment.

Payback Period

The time it takes for an investment to generate an amount of income or cash equal to the cost of the investment.