Financial Institutions and Markets – Final Exam, 2026 – Comprehensive
Study and Practice Material
ROE - ANS✔✔ Net profit after taxes/Bank Capital
Balance sheet of a commercial bank - ANS✔✔ Total bank assets=total bank liabilities + total
bank capital
ROA - ANS✔✔ Net profit after taxes/Total Bank assets
ROE - ANS✔✔ ROA X (Bank Assets/Bank Capital)
Loan loss reserves - ANS✔✔ amount the bank sets aside to cover potential losses from
defaulted loans.
Net interest income - ANS✔✔ a percentage of total assets to yield a quantity called net interest
margin
Liquidity risk - ANS✔✔ Risk of sudden withdrawals by depositors or takedowns of credit lines
Credit risk - ANS✔✔ Risk of default by borrowers on their loans
Interest rate risk - ANS✔✔ Mismatch in maturity of assets and liabilities coupled with a change
in interest rates
Trading (Market) Risk - ANS✔✔ Trading losses in the bank's own account
Study and Practice Material
ROE - ANS✔✔ Net profit after taxes/Bank Capital
Balance sheet of a commercial bank - ANS✔✔ Total bank assets=total bank liabilities + total
bank capital
ROA - ANS✔✔ Net profit after taxes/Total Bank assets
ROE - ANS✔✔ ROA X (Bank Assets/Bank Capital)
Loan loss reserves - ANS✔✔ amount the bank sets aside to cover potential losses from
defaulted loans.
Net interest income - ANS✔✔ a percentage of total assets to yield a quantity called net interest
margin
Liquidity risk - ANS✔✔ Risk of sudden withdrawals by depositors or takedowns of credit lines
Credit risk - ANS✔✔ Risk of default by borrowers on their loans
Interest rate risk - ANS✔✔ Mismatch in maturity of assets and liabilities coupled with a change
in interest rates
Trading (Market) Risk - ANS✔✔ Trading losses in the bank's own account
