If a Bank Has $1 Million in Assets and $50,000

question 31

Multiple Choice

If a bank has $1 million in assets and $50,000 in net worth,its liabilities must equal:

• A)$50,000.
• B)$1,050,000.
• C)$50 million.
• D)$1,000,000.
• E)$950,000.

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Definitions:

Systematic Risk

The risk inherent to the entire market or market segment, not reducible through diversification.

Security Market Line

A line on a chart that displays the relationship between risk and the expected return of the market portfolio. It serves as a graphical representation of the Capital Asset Pricing Model (CAPM).

Beta Coefficient

A framework for quantifying the variability, or orderly risk, of a security or investment compilation when juxtaposed with the general market.

Risk Premium

The additional return an investor demands for choosing a risky investment over a risk-free option, serving as compensation for the additional risk.