Venture capital financing that comes in the “later rounds” of financing may take the
form of:
a. start-up capital loans.
b. mezzanine financing.
c. automobile financing.
d. seed money.
e. staff financing.
Answer:
For a bank that has a positive duration gap, a decrease in interest rates will cause a(n)
_______ in the economic value of assets, a(n) _______ in the economic value of
liabilities, and a(n) _______ in the economic value of equity.
a. increase, decrease, increase
b. increase, increase, decrease
c. increase, increase, increase
d. decrease, decrease, increase
e. decrease, increase, decrease
Answer:
The daily settlement process that credits gains or deducts losses from a futures
customer’s account is called:
a. the variation margin.
b. marking-to-market.
c. the initial margin.
d. the maintenance margin.
e. the gain/loss ratio.
Answer:
Redlining is a lending practice of not extending credit:
a. to minimum wage earners.
b. to finance low-income housing.
c. to students.
d. to targeted minority groups.
e. within a geographic area that is believed to be deteriorating.
Answer:
Which act limited the activities a company could engage in if it owned a bank?
a. Federal Reserve Act
b. Bank Holding Company Act
c. McFadden Act
d. Glass-Steagall Act
e. Competitive Equality Banking Act
Answer:
For which of the following classes of securities are unrealized gains and losses included
as income?
a. Held-to-maturity
b. Available-for-sale
c. Trading
d. all of the above
e. b. and c. only
Answer:
What is the effective annual cost of a credit card that charges 18%, compounded
monthly?
a. 16.63%
b. 18.00%
c. 18.81%
d. 19.56%
e. 19.61%
Answer:
Non-interest expenses includes all of the following except:
a. occupancy expenses.
b. goodwill impairment.
c. insufficient funds service charges.
d. personnel expenses.
e. all of the above are considered non-interest expense.
Answer:
Which of the following is a non-discretionary factor that will decrease a bank’s daily
reserves held at the Federal Reserve?
a. Deferred availability items
b. Receiving a discount window loan
c. Remittances charged
d. Excess balances at the local clearing house
e. Federal funds sold
Answer:
The goal of a bank manager should be:
a. to maximize earnings.
b. to minimize taxes.
c. to minimize risk.
d. to maximize shareholder wealth.
e. to maximize net interest income.
Answer:
Which of the following are two of the “additional Cs” of consumer credit?
a. Customer relationships
b. Competition
c. Continuous employment
d. a. and b. only.
e. b. and c. only.
Answer:
When an investment bank stands willing to buy securities from participants who want
to sell and to sell securities to participants who want to buy, it is:
a. underwriting.
b. market making.
c. principal investing.
d. proprietary trading.
e. organizing a market.
Answer:
How efficiently a firm is using its assets is measured by:
a. liquidity ratios.
b. market value ratios.
c. profitability ratios.
d. activity ratios.
e. leverage ratios.
Answer:
A firm has the following financial statement data: Sales = $1,000, COGS = $400,
Operating Expenses = $200, and Taxes = $200. What is the firm’s profit margin?
a. 10%
b. 20%
c. 30%
d. 40%
e. 60%
Answer:
Put the following steps for conducting a Static GAP analysis in the proper
chronological order.
I. Forecast changes in net interest income for a variety of interest rate scenarios.
II. Select the sequential time intervals for determining when assets and liabilities are
rate-sensitive.
III. Group assets and liabilities into time “buckets.”
IV. Develop interest rate forecasts.
a. I, II, III, IV
b. IV, I, III, II
c. IV, I, II, III
d. II, III, IV, I
e. IV, II, III, I
Answer:
Under current capital requirements, Tier 1 Capital takes of all of the following into
account except :
a. common stockholder’s equity.
b. equity in subsidiaries.
c. goodwill.
d. mandatory convertible debt.
e. non-cumulative perpetual preferred stock.
Answer:
What is the weighted average duration of assets?
a. 2.56 years
b. 3.75 years
c. 4.85 years
d. 5.00 years
e. 7.5 years
Answer:
Which of the following is considered a measure of bank productivity?
a. Return on assets
b. Return on equity
c. Assets per depositor
d. Assets per employee
e. All of the above are measures of bank productivity
Answer:
The _________ authorized money market deposit accounts.
a. Depository Institutions Act (Garn-St. Germain)
b. Competitive Equality Banking Act
c. Financial Institutions Reform, Recovery and Enforcement Act
d. Federal Deposit Insurance Corporation Improvement Act
e. Depository Institutions Deregulation and Monetary Control Act
Answer:
A 10-year annual coupon bond is currently selling for its par value of $1,000 with an
annual yield of 5%. If the bond is callable at par, what is the effective duration of the
bond, assuming rates change by 1%?
a. 10 years
b. 7.36 years
c. 5.52 years
d. 4.60 years
e. 3.68 years
Answer:
The minimum leverage capital for this bank is:
a. $348
b. $450
c. $509
d. $581
e. $696
Answer:
Days Accruals 10
Days Cash 7
Days Inventory 33
Days Payables 21
Days Receivables 35
Average Daily COGS 15
A loan where the entire principal is due at maturity is called a:
a. balloon payment loan.
b. sinking fund loan.
c. mezzanine loan.
d. bullet loan.
e. highly leverage transaction loan.
Answer:
Earnings sensitivity analysis does not consider:
a. changes in interest rates.
b. changes in the volume of rate-sensitive assets due to a change in interest rates.
c. changes in the volume of fixed-rate liabilities due to a change in interest rates.
d. mortgage prepayments.
e. Earnings sensitivity analysis considers all of the above.
Answer:
What is 1st State’s net interest margin?
a. 0.6%
b. 3.8%
c. 5.0%
d. 8.2%
e. 9.8%
Answer:
What is 1st State’s net interest margin?
a. 0.6%
b. 3.8%
c. 4.9%
d. 8.2%
e. 9.8%
Answer:
If a bank expects interest rates to increase in the coming year, it should:
a. increase its GAP.
b. issue fewer variable rate loans.
c. issue more 3-month CDs.
d. issue more fixed rate loans.
e. become more liability sensitive.
Answer:
The _________ mandated that the FDIC take prompt corrective action in dealing with
bank failures.
a. Depository Institutions Act (Garn-St. Germain)
b. Competitive Equality Banking Act
c. Financial Institutions Reform, Recovery and Enforcement Act
d. Federal Deposit Insurance Corporation Improvement Act
e. Depository Institutions Deregulation and Monetary Control Act
Answer:
At the end of 2008, which of the following investment banks remained independent?
a. Bear Stearns
b. Goldman Sachs
c. Lehman Brothers
d. Merrill Lynch
e. a. and b.
Answer:
A bank customer is granted credit for a $2,000 loan at 10% to be repaid in 12 equal
installments. If the loan quoted has an add-on rate, what is the approximate annual
percentage rate (APR) on the loan?
a. 20%
b. 18%
c. 14%
d. 12%
e. 10%
Answer:
Prior to the Basle Agreement, primary capital included all of the following except:
a. long-term subordinated debt.
b. common stock.
c. undivided profits.
d. perpetual preferred stock.
e. the allowance for loan losses.
Answer:
Which of the following is false regarding duration gap analysis?
a. Duration gap analysis does not classify assets as rate-sensitive.
b. Duration gap analysis indicates the potential change in a bank’s net interest income.
c. Duration gap accounts for bank leverage.
d. Duration gap accounts for the present value of cash flows associated with all
liabilities.
e. Duration gap analysis indicates the potential change in a bank’s market value of
equity.
Answer:
Swap participants are subject to:
a. margin requirements.
b. Federal Reserve regulation E.
c. exchange performance.
d. counterparty risk.
e. All of the above.
Answer:
A 90-day Treasury bill is quoted as having a price of $987.50. What is its bond
equivalent yield?
a. 5.00%
b. 5.13%
c. 5.23%
d. 5.62%
e. 5.79%
Answer:
Which of the following would generally be considered price sensitive?
a. Fed funds purchased
b. Fed funds sold
c. Repurchase agreements
d. Demand deposits
e. A 20-year zero coupon bond
Answer: