1) The largest asset on the typical securities firms’ balance sheet in 2012 was
A.securities purchased under agreements to resell.
B.long positions in securities and commodities.
C.reverse repurchase agreements.
D.repurchase agreements.
E.cash.
2) For a nine-month maturity bucket, the bank has _________________ in fixed-rate
assets and _________________ in fixed-rate liabilities.
A.$425; $285
B.$285; $425
C.$285; $359
D.$359; $285
E.$250; $66
3) Altman’s Z-score model is Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 1.0X5
X1 = Working Capital/Total Assets
X2 = Retained Earnings/Total Assets
X3 = EBIT/Total Assets
X4 = Market Value Equity/Book Value Long-Term Debt
X5 = Sales/Total Assets
Using the Altman’s Z model, Big Valley’s Z-score is
A.3.22.
B.2.88.
C.2.65.
D.2.11.
E.1.85.
4) The main advantage of a profit sharing Keogh plan over a money sharing Keogh plan
is that profit sharing plans
A.are eligible for PBGC insurance and money sharing plans are not.
B.have higher maximum contributions than money sharing plans.
C.can have contributions that vary from year to year with profits, while money sharing
plan contributions are fixed.
D.profit sharing Keogh plans are eligible for PBGC insurance and money sharing plans
are not, and they have higher maximum contributions than money sharing plans.
E.none of the options
5) After conducting a rate-sensitive analysis, a bank finds itself with the following
amounts of rate-sensitive assets and liabilities (RSAs and RSL) and fixed-rate assets
and liabilities (FRAs and FRLs); the rate of return and cost rates on the accounts are
also given:
Suppose the institution wishes to fully hedge the interest rate risk with a swap. A swap
is available with whatever notional principal is needed that pays fixed at 4.95 percent
and pays variable at LIBOR. LIBOR is currently 5.11 percent. By how much would
profits change right now if the bank engages in the swap?
A.$202,600
B.-$202,600
C.$300,000
D.-$195,200
E.$195,200
6) A bank has the following balance sheet:
If the spread effect is zero and all interest rates decline 50 basis points, the bank’s NII
will change by ________________ over the year.
A.$0
B.$400,000
C.-$400,000
D.$700,000
E.-$700,000
7)
If FNBNA is expecting a $15 million net deposit drain and the securities liquidity index
is 0.98, how many securities would have to be liquidated if the bank used only its
securities to fund the expected deposit drain?
A.$15,000,000
B.$16,444,331
C.$15,600,000
D.$15,306,122
E.$16,772,345
8) Darby Minerals wants to hire an investment banker to sell two million shares of
stock to the public. Darby is considering using either a firm commitment or a best
efforts offering.
9) A three-class (Class A, B, and C) sequential pay CMO starts with an $80 million
principal amount in each class. The mortgages in the pool have a 7 percent interest rate.
The CMO classes receive monthly payments. During the first month, $1 million in
interest is received from mortgage holders and $1.5 million in principal. What principal
amounts are outstanding for each class during the second month? How will this affect
the total payment each class receives? Explain.