Question 1- Please choose the correct answer inside the bracket and copy it to your answer sheets (12 Marks) a. Given a bank's return on assets, the higher the bank capital, the (higher/lower) the return for the owners of the bank b. Greater flexibility in liability management has allowed banks to (increase/decrease) the proportion of their assets held in loans. C. In the absence of regulation, banks would probably hold too little capital, (increasing/ decreasing) the return on equity. d. If a bank's return on equity remains constant, but the ratio of bank assets to bank capital increases the bank's return on assets must have (increased/decreased). e. Loans are probably the largest/smallest) category of bank assets and earn the (highest/lowest) return of all bank assets. f. A bank failure is more likely to occur when a bank holds (more/less) equity capital g. A bank's off-balance-sheet activities usually increase/decrease) its net income but do not change its assets or liabilities. h. If a bank has more interest-rate sensitive liabilities than interest-rate sensitive assets, an increase in the interest rate will cause profits to (increasel decrease). A bank that cannot meet its loan commitments is experiencing the results of credit/ liquidity) risk. j A bank manager concerned about interest income who expects interest rates to rise and who knows the bank currently has a positive gap should (increase/decrease) rate-sensitive assets and increase/decrease) rate-sensitive liabilities