A bank that is examining the ratio of annual costs of goods sold to average inventory, is
examining which category of ratios?
A. Expense control measures
B. Operating efficiency measures
C. Coverage measures
D. Liquidity measures
E. Leverage measures
Answer:
A multinational company raises short-term credit through London’s financial district.
They are most likely using:
A. Eurocommercial paper (ECP)
B. Depository receipt (DR)
C. Note issuance facility
D. Currency swap
E. None of the options is correct.
Answer:
The dominant holder of bank deposits in the U.S.:
A. is the private sector.
B. are state and local governments.
C. are foreign governments.
D. are foreign banks.
E. None of the options is correct.
Answer:
The principal economic function of banks is to:
A. take deposits.
B. make loans.
C. sell financial services.
D. encourage spending.
E. None of the options is correct.
Answer:
A bank or financial service institution can generally meet reserve requirements using all
of the following except:
A. selling liquid investments.
B. borrowing in the fed funds market.
C. drawing on any excess correspondent balances.
D. borrowing in the repo market.
E. selling new shares.
Answer:
There are three banks in East Panhandle. First State Bank which currently has 25
percent of the deposits in the area, Second State Bank which currently has 40 percent of
the deposits, and Third State Bank which has the rest. What is the
Herfindahl-Hirschman Index for East Panhandle (compute the share of Third State
Bank first)?
A. 100
B. 2,200
C. 3,450
D. 3,640
E. None of the options is correct
Answer:
The federal law that prohibited federally supervised commercial banks from offering
investment banking services on privately issued securities is known as:
A. the Glass-Steagall Act.
B. the Bank Merger Act.
C. the Depository Institutions Deregulation and Monetary Control Act.
D. the Federal Reserve Act.
E. None of the options are correct.
Answer:
Following is the information listed below for Carter State Bank. What is the bank’s
asset utilization ratio?
A. 8.46 percent
B. 16.03 percent
C. 15.71 percent
D. 1.36 percent
E. None of the options is correct
Answer:
Following data pertains to Castle State Bank.
What is the bank’s net profit margin? A. 20.45%
B. 18.33%
C. 12.22%
D. 7.33%
E. 2.5%
Answer:
A financial institution’s bad-debt reserve, as reported on its balance sheet, is called:
A. unearned income or discount.
B. allowance for possible loan losses.
C. intangible assets.
D. customer liability on acceptances.
E. None of the options are correct.
Answer:
Which of the following is the role performed by accommodating banks?
A. They act as intermediaries in the Eurodollar market.
B. They issue negotiable CDs for themselves and for other banks.
C. They sell commercial paper to raise funds for themselves and other firms belonging
to their bank holding company.
D. They buy and sell federal funds simultaneously in order to make a market for
reserves of customer banks.
E. None of the options is correct.
Answer:
Which of the following should be part of the written loan policy?
A. Lending authority of each loan officer and loan committee
B. Lines of responsibility for finding and reporting information within the loan
department
C. A statement of quality standards for all loans
D. A statement for the preferred upper limit for total loans outstanding
E. All of the options should be part of the written loan policy
Answer:
The ratio of core capital to average total assets is called the:
A. supplemental capital ratio.
B. leverage ratio.
C. long-term capital ratio.
D. GAAP capital ratio.
E. None of the options is correct.
Answer:
In recent years, organizational hierarchy in banks is increasingly becoming more:
A. simpler.
B. complex.
C. vertical.
D. horizontal.
E. flat.
Answer:
Michelle Woods, a 64 year old retired professor, has applied for a home equity loan
from a bank in her neighborhood. The bank structured a loan against her property in a
manner that she receives $5,000 every month. This is an example of:
A. mortgage loan.
B. construction loan.
C. retirement benefits.
D. reverse mortgage loan.
E. pass-through loan.
Answer:
A group of six investors wants to open a new bank. In their application to the
Comptroller of the Currency, they discuss that there are six banks already existing in the
community and that the largest of these has just acquired one of the smaller banks.
These six banks do a moderate amount of advertising in the community. There is also
one credit union that has one office and a savings bank that has two branches on the
east side of town. Growth in the community is to the west. Which decision factor are
the investors discussing for seeking a new charter?
A. The level of economic activity in the community
B. The growth of economic activity in the community
C. The need for additional advertising in the community
D. The strength and character of the local competition
E. None of the options are correct
Answer:
A bank customer is granted credit for a $2,000 loan at 10 percent to be repaid in 12
equal installments. If the loan is a discount loan, what is the monthly payment?
A. $200.00
B. $192.35
C. $184.20
D. $173.12
E. $166.67
Answer:
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. Many customers have left the
bank for banks with more reliable computer systems. Which type of risk would this be
an example of?
A. Operational risk
B. Legal risk
C. Compliance risk
D. Strategic risk
E. Reputation risk
Answer:
Which of the following is an advantage of a credit scoring model?
A. Credit scoring models rely on the evaluation of an experienced credit officer
B. Credit scoring models are immune from charges of discrimination
C. Credit scoring models never make mistakes
D. Credit scoring models can handle a large volume of applications in a short period of
time
E. All of the options are advantages of credit scoring models
Answer:
The business loan pricing method that includes the nonfunds operating costs of making
a loan and the bank’s desired profit margin as some of its factors in pricing a loan, is
called:
A. the cost-plus loan pricing method.
B. the price leadership model.
C. the markup model.
D. customer profitability analysis.
E. None of the options is correct.
Answer:
Suppose the international banks operating in Venezuela have to meet the same legal
reserve requirements as domestic banks to avoid massive threats to economic health in
the nation. This would be in support of which reason for regulating international
banks?
A. Protecting the safety of depositor funds
B. Promoting stable growth in money and credit
C. Providing foreign currency controls
D. Protecting domestic financial institutions
E. Restricting the outflow of scarce capital
Answer:
Everett Bank has just learned that there is a disgruntled former employee who has
created a blog that is telling everyone that Everett Bank has halved their customer
service representatives and therefore customers have great difficulty getting through to
a relationship officer when there is a problem with their account. Everett is worried that
it may lose customers as a result of such a write-up. Which type of risk would this be an
example of?
A. Operational risk
B. Legal risk
C. Compliance risk
D. Strategic risk
E. Reputation risk
Answer:
As per liability management banking, the control lever to regulate the liabilities and
assets on the balance sheet is
A. management discretion.
B. the volume of loan demand the bank faces.
C. deposit growth.
D. market interest rates.
E. None of the options is correct.
Answer:
A bank has determined that its marginal cost of raising funds is 4.5 percent and that its
nonfunds costs to the bank are 0.5 percent. It has also determined that its margin to
compensate the bank for default risk for a particular customer is 0.30 percent. It has
also determined that it wants to have a profit margin of 0.3 percent. If this customer
wants to borrow $10,000,000, how much in total interest costs will this customer pay in
one year?
A. $450,000
B. $480,000
C. $510,000
D. $560,000
E. None of the options is correct.
Answer:
Suppose Bank A’s stock price is $75 and Bank B’s stock price is $25. Bank A is
planning to purchase Bank B by paying Bank B’s shareholders a bonus of $10 per share.
If Bank B has 100,000 shares outstanding, how many shares of Bank A will the
shareholders of Bank B receive?
A. 100,000 shares
B. 33,333 shares
C. 46,667 shares
D. 214,286 shares
E. None of the options is correct
Answer:
Negotiable Order of Withdrawal (NOW) accountsinterest-bearing savings accounts that
can be used essentially the same as checking accountswere authorized by:
A. Glass-Steagall Act.
B. Depository Institutions Deregulation and Monetary Control Act (DIDMCA).
C. Bank Holding Company Act.
D. Garn-St. Germain Depository Institutions Act.
E. None of the options is correct.
Answer:
The First National Bank of Lakeland makes risky loans to businesses to expand and
grow their businesses while at the same time issuing low-risk securities to their
depositors and other fund providers. Which of the following services is this bank
offering to their customers?
A. Risky arbitrage services
B. Liquidity services
C. Delegated monitoring services
D. Divisibility of money services
E. Credit services
Answer:
Mark Green is considering buying a new Honda Accord. The purchase price of the car
is $21,000 but Mark has a trade-in worth $4,500. Mark needs a loan to buy the car and
knows that his local bank requires him to put down 10 percent of the purchase price
after the value of the trade-in is considered. Mark also knows that bank will charge 8
percent for the loan and require monthly payments over the next 4 years.
If Mark makes the minimum down payment on the car, what is the amount of the loan
that Mark will receive? A. $18,900
B. $14,850
C. $16,500
D. $14,400
E. None of the options is correct
Answer:
Recently, FOREX trading activity among leading commercial and investment bank
dealers has sharply increased due to:
A. volatility among leading currencies.
B. increase in security underwriting for corporations.
C. provision of foreign marketing assistance to customers.
D. introduction of payments and cash management services.
E. supply of foreign currencies directly to customers.
Answer:
A group of six investors wants to open a new bank. In their application to the
Comptroller of the Currency, they discuss that the population per banking office has
risen to 6,000. In addition, growth in the community is to the west of town and there is
only one bank serving that part of the community. Also, a new housing subdivision has
just started in this part of town that should include 350 new homes. Which decision
factor are the investors discussing for seeking a new charter?
A. The level of economic activity in the community
B. The growth of economic activity in the community
C. The need for a new financial firm
D. The growth in the local competition
E. None of the options are correct
Answer:
Net yield for a bank is calculated as: A. total revenues received/total loan volume.
B. fee income/total value of services rendered
C. total revenues received/total capital.
D. (total revenues received – expenses and losses)/total loan volume.
E. (total revenues received – expenses and losses)/total capital.
Answer:
The most common sources that lenders look to for repayment of business loans include
all of the following except:
A. the borrower’s cash flow.
B. assets pledged as collateral.
C. goodwill of the borrower.
D. the borrower’s net worth.
E. None of the options is correct.
Answer:
Which of the following ratios would be a measure of credit risk?
A. Net charge-offs of loans/Total loans and leases
B. Interest on CDs/Total CDs issued
C. Interest Sensitive Assets/Interest Sensitive Liabilities
D. Equity Capital/Total Assets
E. None of the options is correct
Answer:
A(n) ____________________________________________ grants the buyer the right
to deliver or take delivery of a designated currency at a specified price until it expires.
Answer:
In the worldwide banking system, __________ represent transferable time deposits in a
variety of currencies and are often the principal source of short term borrowings by
banks.
Answer:
A bank which spans regions, nations, and continents, offering the widest menu of
financial services is known as a _________ bank.
Answer:
The ______________ is a uniform rating system developed by regulators where banks
are given a rating between one and five in each of the six categories and an overall
rating.
Answer:
An investment maturity strategy which calls for a bank to have one-half of its
investment portfolio in very short term assets and the other half in long term assets is
known as the ________________________.
Answer:
_________________________ is a strategy in which a financial institution borrows in
the money market to meet its liquidity needs.
Answer:
When a bank enters into a new market area as the result of a merger with another
financial institution, they have practiced __________________ diversification.
Answer:
A(n) ________ offers loans to commercial enterprises (such as appliance dealers) and
to individuals and families using funds borrowed in the open market or from other
financial institutions.
Answer:
A(n) _________________________ is a service developed by banks where a bank
shifts money overnight out of accounts with reserve requirements into savings accounts
and other similar accounts with no reserve requirements
Answer:
The _________________________ is the added cost of bringing in new funds.
Answer:
Common nondeposit borrowings of a bank are _____-term rather than ______-term
debt.
Answer:
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.
Answer:
The risk that has to do with fraud, embezzlement and bank robberies is called
_________________.
Answer:
The ________________________ is the law that states that a bank must get federal
approval in order to combine with another bank.
Answer:
_____________ refers to the movement of businesses across industry lines in order to
broaden its base.
Answer: