The Bank Is Considering Changing Its Asset Mix by Moving

question 131

Multiple Choice

The bank is considering changing its asset mix by moving $100 million of commercial loans into Treasury securities.If it does change the asset mix and capital remains the same, the risk-based capital ratio

• A)will not change because the total assets have not changed.
• B)will decrease because the earnings rate on Treasuries is less than on loans.
• C)will increase by 16.67 percent.
• D)will increase because the assets will have less risk.
• E)will change, but the direction cannot be determined with the information given.

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Definitions:

Alpha Level

The threshold of significance in hypothesis testing, below which the null hypothesis is rejected, commonly set at 0.05.

Null Hypothesis

A hypothesis that suggests there is no significant difference or effect, used as a starting point in hypothesis testing.

P-value

The probability of obtaining test results at least as extreme as the ones observed during the test, assuming that the null hypothesis is true.

Null Hypothesis

A statistical hypothesis which proposes no significant difference or effect, used as a default assumption until evidence suggests otherwise.