Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 1
1. The number of banks that help companies conduct business overseas is declining.
a.
True
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.1 – LO: 10.1.1
2. Foreign bank branches operating in the United States can only accept deposits less than $100,000 from U.S. citizens.
a.
True
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.1 – LO: 10.1.1
3. The most common type of trade financing involves a letter of credit.
a.
True
b.
False
ANSWER:
True
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.2 – LO: 10.1.2
4. The Single Euro Payments Area (SEPA) designates specific bank branches within major European cities where
customers can go to pay bills for items purchased in other countries.
a.
True
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.1 – LO: 10.1.1
5. Health insurance pays benefits when the holder is unable to earn a living because of illness or injury.
a.
True
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.2.2 – LO: 10.2.2
6. Every business, no matter how large or small, needs to disburse and collect cash to complete business transactions.
a.
True
b.
False
ANSWER:
True
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.3.1 – LO: 10.3.1
7. Sovereign wealth funds use money that is part of a country’s official currency reserves.
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 2
a.
True
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.1 – LO: 10.1.1
8. A capital investment is more liquid than stocks or bonds.
a.
True
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.3.2 – LO: 10.3.2
9. A trust is an arrangement by which one party holds property on behalf of another party for certain defined purposes.
a.
True
b.
False
ANSWER:
True
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.4.1 – LO: 10.4.1
10. Probate is a court proceeding that settles an estate’s final debts and formally passes legal title to property from the
decedent to his or her heirs.
a.
True
b.
False
ANSWER:
True
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.4.2 – LO: 10.4.2
11. Because of the tax advantages, many people use annuities as the basis of their overall financial plan, instead of CDs or
savings accounts.
a.
True
b.
False
ANSWER:
True
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.2.3 – LO: 10.2.3
12. Investing in mutual funds usually increases your cost of investing.
a.
True
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.2.3 – LO: 10.2.3
13. The risk posed by variations in exchange rates between countries is called
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 3
a.
currency risk.
b.
financial risk.
c.
country risk.
d.
exchange risk.
ANSWER:
a
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.1 – LO: 10.1.1
14. An instrument given by a bank on behalf of a buyer to pay back the bank of the seller a given sum in a given time is
called a(n)
a.
promissory note.
b.
draft.
c.
international IOU.
d.
letter of credit.
ANSWER:
d
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.2 – LO: 10.1.2
15. The demand for a given currency will be strong if all of the following factors are present EXCEPT
a.
low inflation.
b.
low interest rates.
c.
a positive trade balance.
d.
a strong economic forecast.
ANSWER:
b
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.2 – LO: 10.1.2
16. Which of the following is a provision of the Gramm-Leach-Bliley Act?
a.
Banks are prohibited from owning brokerage firms.
b.
Banks are not allowed to sell stock.
c.
Financial services companies are required to have and provide to customers a written privacy policy.
d.
All of the above are provisions of the Gramm-Leach-Bliley Act.
ANSWER:
c
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.2.1 – LO: 10.2.1
17. The type of business insurance that pays for medical care and physical rehabilitation of workers injured on the job is
called
a.
workers’ compensation.
b.
short-term disability.
c.
commercial liability.
d.
long-term disability.
ANSWER:
a
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 4
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.2.2 – LO: 10.2.2
18. Which of the following bank collection services allows accounts receivable payments to be sent directly to the bank?
a.
zero-balance accounts
b.
automated clearing house network
c.
lockbox service
d.
none of the above
ANSWER:
c
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.3.2 – LO: 10.3.2
19. The practice of buying debt at a discount is called
a.
discounting.
b.
investing.
c.
financing.
d.
factoring.
ANSWER:
d
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.3.2 – LO: 10.3.2
20. The person who creates a trust is called a
a.
corpus.
b.
donor.
c.
beneficiary.
d.
maker.
ANSWER:
b
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.4.1 – LO: 10.4.1
21. Which of the following retirement products allows employees to make tax-deferred contributions, which are often
matched by the company, to a trust?
a.
traditional IRA
b.
variable annuity
c.
401 (k) plan
d.
Roth IRA
ANSWER:
c
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.4.2 – LO: 10.4.2
22. A debt instrument issued for a period of more than one year with the purpose of raising capital through borrowing is
called a(n)
a.
bond.
b.
annuity.
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 5
c.
certificate of deposit.
d.
stock.
ANSWER:
a
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.2.2 – LO: 10.2.2
23. The ____________________ charters and supervises U.S. national banks that do international business.
ANSWER:
Office of the Comptroller of the Currency
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.1 – LO: 10.1.1
24. ____________________ corporations are financial corporations that are federally chartered and allowed to engage
only in international banking or other financial transactions related to international business.
ANSWER:
Edge
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.1 – LO: 10.1.1
25. A(n) ____________________ bank acts as a point of contact for other banks that do not have a branch in the host
country.
ANSWER:
correspondent
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.1 – LO: 10.1.1
26. The entire range of political, legal, social, and economic conditions that may put international business at risk is called
____________________ risk.
ANSWER:
country
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.1 – LO: 10.1.1
27. Money ____________________ is the practice of depositing, investing, or exchanging money in such a way as to
conceal its illegal source.
ANSWER:
laundering
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.1 – LO: 10.1.1
28. A foreign ____________________ rate is the value of one currency in terms of another.
ANSWER:
exchange
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.1 – LO: 10.1.1
29. ____________________ insurance compensates the owner of real estate if his or her clear ownership of property is
challenged.
ANSWER:
Title
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.2.2 – LO: 10.2.2
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 6
30. The practice of having an outside party supply a product or service to a firm that the firm had been supplying itself is
called ____________________.
ANSWER:
outsourcing
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.3.1 – LO: 10.3.1
31. Accounts ____________________ refers to short-term debt from purchases on credit that must be paid to suppliers of
goods or services, typically within 60 days or less.
ANSWER:
payable
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.1 – LO: 10.1.1
32. The program that was developed to provide standardized euro payments either within a country’s borders or across
countries’ borders is called ____________________.
ANSWER:
Single Euro Payments Area (SEPA)
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.2.3 – LO: 10.2.3
33. ____________________ is the capital raised by a corporation through the issuance of shares entitling holders to an
ownership interest in the corporation.
ANSWER:
Stock
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.3.2 – LO: 10.3.2
34. Assume the current exchange rate for euros to the U.S. dollar is currently 1.10 euros to 1 U.S. dollar. Convert the
value of U.S. goods valued at $55,000 to euros.
ANSWER:
$60,500
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.2 – LO: 10.1.2
35. The value of one U.S. dollar equals 0.45 samolians, the currency of the country of Erehwon. What would $500 be
worth, converted into samolians?
ANSWER:
225 samolians
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.2 – LO: 10.1.2
36. The value of one U.S. dollar equals 0.45 samolians, the currency of the country of Erehwon. What would 135
samolians be worth, converted into U.S. dollars?
ANSWER:
$300
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.2 – LO: 10.1.2
37. A business accepted a note of $9,000 plus a $1,000 service fee to be paid in 12 months. Not long after, the business
arranged for a local bank to purchase the debt for a factoring fee of 4 percent. How much will the business receive from
the bank?
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 7
ANSWER:
$9,600
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.3.2 – LO: 10.3.2
38. A business accepted a note of $7,000 plus a $500 service fee to be paid in 12 months. Not long after, the business
arranged for a local bank to purchase the debt for a factoring fee of 3 percent. What was the cash amount of the factoring
fee?
ANSWER:
$225
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.3.2 – LO: 10.3.2
39. What organization has primary responsibility for supervising the branches and agencies of foreign banks operating
within the United States?
ANSWER:
The Federal Reserve has this responsibility.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.1 – LO: 10.1.1
40. Name three special risks for bankers involved in underwriting international businesses.
ANSWER:
Three special risks are financial risk, currency risk, and country risk.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.1 – LO: 10.1.1
41. What is the primary goal of insurance?
ANSWER:
The primary goal of insurance is to allocate the risks of loss from the individual to a great
number of people, or to protect holders against financial disaster.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.2.2 – LO: 10.2.2
42. What savings can a firm derive from outsourcing?
ANSWER:
Savings can include employees’ salary packages, including paid vacation and sick time,
benefits such as health insurance, and various payroll taxes.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.3.2 – LO: 10.3.2
43. What is Electronic Data Interchange (EDI)?
ANSWER:
EDI is the computer–to-computer exchange of business information through standard
interfaces.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.3.2 – LO: 10.3.2
44. What is a living trust?
ANSWER:
A living trust is a legal document that provides an expedient way to transfer property at a
person’s death.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.4.2 – LO: 10.4.2
Name:
Class:
Date:
ANSWER:
45. Briefly define the terms mutual fund and diversification.
ANSWER:
A mutual fund is an investment company that pools money from many savers who have
small amounts to invest. Diversification refers to the distribution of assets in a portfolio
among different types of securities and maturity dates.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.2.3 – LO: 10.2.3
46. What is a sovereign wealth fund?
ANSWER:
Excess cash of a country that is placed in a fund that is segregated from the country’s official
currency reserves is called a sovereign wealth fund. This money can be invested to generate a
profit for the country.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.1 – LO: 10.1.1
47. What are the World Bank and the International Finance Corporation (IFC)? Name the functions of the IFC.
ANSWER:
The World Bank is a partner in strengthening economies and expanding markets around the
world, particularly in developing countries. The World Bank makes loans to these counties
and expects the loans to be repaid. The IFC is a member of the World Bank Group; it
promotes private investments in developing countries. Functions of the IFC include financing
private sector projects in developing countries, helping private companies in developing
countries obtain financing in international markets, and providing advice to businesses and
governments.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.1.1 – LO: 10.1.1
48. Name and briefly describe three common personal health insurance policies available in the United States.
ANSWER:
Traditional health insurance allows holders to visit any doctor or hospital they want;
premiums tend to be higher than for other plans. A health maintenance organization (HMO)
is a health-care system that organizes doctors and hospitals in a network; members must use
doctors and hospitals that belong to the network and must pay a set fee that gives them access
to the HMO’s services. A preferred provider organization (PPO) is a network of doctors and
hospitals that agree to provide care at a reduced cost to members; they are not as restrictive as
HMOs.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.2.2 – LO: 10.2.2
49. Describe the function and purpose of a zero-balance account (ZBA).
ANSWER:
A ZBA is an account that starts each business day at a zero balance and is related to a central
account. Throughout the day, transactions are debited or credited as payments are made or
received. At the end of the day, they are reconciled with the central account and are returned
once again to a zero balance. ZBAs ensure that funds do not stand idle in multiple accounts
and eliminate the need for the customer to monitor accounts and initiate account transfers.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.3.2 – LO: 10.3.2
50. Define the terms estate, will, and executor. Describe the steps that are usually involved in the settlement of an estate.
Name:
Class:
Date:
individual gives instructions as to what is to happen upon death in regard to his/her estate. An
executor is the person named in a will to administer the estate. Estate settlement usually
involves the following steps: (1) The executor identifies and values the estate assets. (2) The
executor ensures that creditors, estate expenses, and taxes are paid. (3) The executor prepares
and files the necessary tax documents with the proper authorities. (4) The executor distributes
the assets to the beneficiaries.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 10.4.2 – LO: 10.4.2