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Banking Chapter 1 1 When a bank agrees to handle the cash collections and disbursements for a company and invest any temporary cash surpluses in interest bearing assets, they are providing
1. _______________________ is a traditional service provided by banks in which the banks store the valuables of their customers and certify their true value. 2. The fact that financial institutions make loans based on confidential information is the _______________________ theory […]
Banking Chapter 10 1 The investment maturity strategy which calls for the bank to have one half of its investment portfolio in very short term assets and one half of its investment
1. A(n) _________________________ is a security issued by the federal government which has less than one year to maturity when it is issued. 2. Debt instruments issued by cities, states and other political entities and which are exempt from federal […]
Banking Chapter 11 1 This is the period in which the bank has to keep their average daily level of required reserves for a particular computation period
1. A(n) __________________ is an asset which can be converted into cash easily, which has a relatively stable price and is reversible so that the seller can recover their original investment with little risk of loss. 2. When a financial […]
Banking Chapter 12 1 When financial institutions tempt customers by paying postage both ways in bank-by-mail services or by offering free gifts such as teddy bears
1. A(n) _________________________ requires the bank to honor withdrawals immediately upon request. 2. A(n) _________________________ is an interest bearing checking account and gives the bank the right to insist on prior notice before customer withdrawals can be honored. Answer: Negotiable […]
Banking Chapter 13 1 When a bank buys funds from other financial institutions in order to cover good quality loan demand and to satisfy deposit reserve requirements they are practicing
1. Dollar denominated CDs issued outside the U.S. are called _________________________. 2. The CDs large foreign banks sell through their U.S. branches are called _________________________. Answer: Yankee CDs 3. When a bank buys funds from other financial institutions in order […]
Banking Chapter 14 1 A nonproprietary mutual fund is where the bank acts as a broker for a nonaffiliated mutual fund but does not act as an investment advisor
1. When bank customers purchase stocks, bonds, mutual funds, and annuities through the bank, these products are referred to as ________________________. 2. A(n) __________________ mutual fund is a mutual fund offered through a bank’s affiliated company. The bank acts as […]
Banking Chapter 15 1 Supplemental capital such as the allowance for loan losses, subordinated debt, mandatory convertible debt, intermediate-term preferred stock
1. The risk that has to do with banks trading in foreign currencies is called _________________________. 2. The risk that has to do with fraud, embezzlement and bank robberies is called __________________. Answer: crime risk 3. _________________________ is measured by […]
Banking Chapter 16 1 A written loan policy gives loan officers and the bank’s management specific guidelines in making individual loan decisions and in forming the bank’s loan portfolio
1. The______________ is a uniform rating system developed by regulators where banks are given a rating from one to five in each of six categories and an overall rating from one to five. 2. One of the 6 C’s of […]
Banking Chapter 17 1 The only way the bank can renege on its promise is if there has been a “material adverse change” in the borrower’s financial condition
1. A(n)___________________________________________ is generally used to finance the purchase of inventory to sell and take advantage of the firm’s normal cash cycle to repay the loan. 2. A(n)______________________ is generally used to support the construction of homes, apartments, office buildings […]
Banking Chapter 17 2 The business loan pricing method that includes the non funds operating costs of making a loan plus the bank’s desired profit margin is
C) Contingent liability D) Marketability of the product or service E) None of the above 103. Which dimension of a business firm’s financial and operating performance would the gross profit margin fit best? A) Liquidity measure B) Market indicator C) […]
Banking Chapter 18 1 The interest rate on most consumer loans is based on the cost of loanable funds to the bank plus non funding cost plus premiums for default and time to maturity
1. The purchase of a house or a multifamily dwelling such as a duplex, triplex or apartment building is usually financed through the use of a______________________ loan. 2. A(n)______________________ loan is a short- or medium-term loan repayable in two or […]
Banking Chapter 18 2 When interest owed on a loan is added to the principal amount of the loan to determine a borrowing customer’s required installment payments
99. Which of the following is not part of the evaluation of an installment loan? A) The borrower’s track record in caring for and maintaining property B) Evidence of stable employment C) Evidence of residence stability D) Evidence of income […]
Banking Chapter 19 1 When the existing ownership of the bank experiences a loss in their share of the company due to an increased number of shares going to new stockholders it is known as
1. The____________________________________________ is the law that requires each merging bank to seek approval from its principal federal regulating agency before a merger can take place. 2. Under the terms of Bank Merger Act, the federal regulating agencies must give top […]
Banking Chapter 2 1 in order to do this they must tell the financial-services company in writing that they do not want their personal information shared with outside parties
1. The _____________________ was created as part of the Glass Steagall Act. In the beginning it insured deposits up to $2,500. 2. The________________________ is the law that states that a bank must get approved from their regulatory body in order […]
Banking Chapter 20 1 They can offer export insurance coverage, transportation, warehousing and other services for exporting goods and services
1. A(n)___________________________________________ is the simplest organizational form for an international bank. This is a limited service office that markets the services provided by the home office and identifies new customers but does not take deposits or book loans. 2. A(n)______________________ […]
Banking Chapter 3 1 Over the years, managers of banks and other financial institutions have evolved different organizational forms to address changes in the industry
1. A(n) ___________________ is a machine located at the merchant’s place of business which allows depositors to use their debit card to pay for purchases directly. 2. A(n) _____________________ is a bank which offers its full range of services from […]
Banking Chapter 4 1 One argument frequently presented for regulation and control over bank chartering activity is that banks can create more money than any other financial institution
1. The state banking commissions (at the state level) and the Office of the Comptroller of the Currency (at the federal level) are the only ones able to issue a(n)______________________ for a new U.S. bank. 2. The______________________ issues charters for […]
Banking Chapter 6 1 The first part is pre-tax net operating income over total operating revenue which looks at how many dollars of revenue survive after operating expenses are removed
1. The equity multiplier for a bank measures the amount of _____________________ of the bank and is one part of the evaluation of the bank’s ROE. 2. __________________________ is the risk that has to do with the quality of the […]
Banking Chapter 6 2 Chaos State Bank has an old computer system which can go down for weeks at a time, leaving customers unable to access their accounts online
C) 15.71 percent D) 1.36 percent E) None of the above 80. The TRC Bank has a net profit margin of 7.5%, an asset utilization ratio of 18%, an equity multiplier of 20 times. What is this bank’s ROA? A) […]
Banking Chapter 7 1 In recent decades, banks have aggressively sought to insulate their assets and liability portfolios and profits from the ravages if interest rate changes
1. The ___________________ view of assets and liabilities held that the amount and types of deposits was primarily determined by customers and hence the key decision a bank needed to make was with the assets. 2. Recent decades have ushered […]
Banking Chapter 7 2 The duration of a bond is the weighted average maturity of the future cash flows expected to be received on a bond. Which of the following is a true statement concerning duration
C) Increase, increase, decrease D) Decrease, decrease, decrease E) Decrease, increase, increase 98. If a bank has a negative GAP, a decrease in interest rates will cause interest income to __________, interest expense to__________, and net interest income to __________. […]
Banking Chapter 8 1 The financial futures markets are designed to shift the risk of interest rate fluctuations from risk-averse investors to speculators who are willing to accept and possibly
1. A(n) _________________________ is an agreement between a buyer and a seller today which calls for the delivery of a particular security in exchange for cash at some future date for a set price. 2. A financial institution goes _________________________ […]
Banking Chapter 8 2 An agreement where a party with a lower credit rating enters into an agreement to exchange interest payments with a borrower having a higher credit rating is know as
A) Trying to avoid higher borrowing costs B) Trying to avoid declining asset values C) Trying to avoid lower than expected yields on from loans and securities D) A and B above 94. Suppose a bank has an asset duration […]
Banking Chapter 9 1 The issuing bank, in return for a fee, guarantees the repayment of a loan received by its customer or the fulfillment of a contract made by its customer to a third party
1. When a bank sets aside a group of income-earning assets and then sells securities based upon those assets it is ________________________ those assets. 2. Often when loans are securitized they are passed on to a _________________________ who pools the […]