As market rates rise, prepayment speed _______, while modified duration _________.
a. slows, lengthens
b. slows, shortens
c. accelerates, lengthens
d. accelerates, shortens
e. accelerates, is unaffected
Answer:
Total operating expense is comparable to _________ for a non-financial firm.
a. sales
b. cost of goods sold + other operating expenses
c. interest expense
d. earnings before taxes
e. net income
Answer:
Which of the following would not be considered an earning asset?
a. Cash due from banks
b. Municipal securities
c. Treasury bills
d. Repurchase agreements
e. Mortgages
Answer:
The _________ allows adequately capitalized bank holding companies to acquire banks
in any state.
a. Riegle-Neal Interstate Banking and Branching Efficiency Act
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:
_______________________ represents the amount of long-term financing required for
current assets.
a. Permanent working capital
b. Seasonal working capital
c. Secondary working capital
d. Perpetual working capital
e. Passive working capital
Answer:
A bank is currently exactly meeting its reserve requirements of 10%. If the bank has a
deposit inflow of $10,000,000, what is the impact on its required reserve position?
a. It now has excess reserves in the amount of $9,000,000.
b. It now has excess reserves in the amount of $10,000,000.
c. It is now deficient $1,000,000 in required reserves.
d. It is now deficient $9,000,000 in required reserves.
e. There would be no impact on the bank’s required reserves.
Answer:
Which Act separated commercial banking, investment banking and insurance into three
separate industries?
a. Glass-Steagall Act
b. Bank Holding Act
c. McFadden Act
d. Federal Reserve Act
e. Competitive Equality Banking Act
Answer:
Which of the following is not true regarding prepayments?
a. The greater the prepayments, the shorter the security’s duration.
b. Prepayments are relatively low during the first two years of a mortgage.
c. Mortgages to older people tend to have more prepayments than mortgages to younger
people.
d. Prepayments increase as interest rates fall.
e. all of the above are true
Answer:
Which of the following is not considered a non-interest expense?
a. Wages and salaries
b. Rent
c. Required reserves held at the Federal Reserve
d. Electricity
e. Employee benefits
Answer:
To be classified as a non-current loan, payments must be past due a minimum of how
many days?
a. 30 days
b. 60 days
c. 90 days
d. 120 days
e. 158 days
Answer:
Why do banks generally prefer lower capital requirements?
a. To minimize the impact shareholders have on management decisions.
b. To increase the influence of bank regulators.
c. To increase a bank’s return on equity.
d. To increase depositor protection.
e. To maximize operating leverage.
Answer:
Which of the following would be an example of a Eurodollar account?
a. A U.S. dollar denominated deposit held at a Japanese bank.
b. A British pound denominated deposit held at a New York bank.
c. A French franc denominated deposit held at a Toronto bank.
d. A U.S. dollar denominated deposit held at a Chicago bank.
e. A EMU euro denominated deposit held at a London bank.
Answer:
A firm’s ability to meet its short-term debt obligations is measured by:
a. liquidity ratios.
b. market value ratios.
c. profitability ratios.
d. activity ratios.
e. leverage ratios.
Answer:
The Federal Reserve has reduced the use of reserve requirements as a monetary policy
tool because:
a. the Fed has focused on controlling short-term interest rates.
b. of the increased use of sweep accounts.
c. reserve requirements are a “tax” on banks .
d. All of the above.
e. a. and c. only.
Answer:
How do capital requirements constrain bank growth?
a. By discouraging investments in Treasury securities.
b. By disallowing the ownership of mortgage loans.
c. By decreasing a bank’s net interest margin.
d. By limiting the amount of new assets that a bank can acquire through debt financing.
e. By reducing a bank’s CAMELS ratings.
Answer:
Which of the following is not a measure of liability liquidity?
a. Total equity to total assets
b. Core deposits to total assets
c. Total deposits to total assets
d. Federal funds sold to total assets
e. Loan losses to deposits.
Answer:
Which of the following is not considered a monetary policy tool of the Federal
Reserve?
a. Changing float requirements
b. Open market operations
c. Changing the discount rate
d. Changing reserve requirements
e. All of the above are considered to be monetary policy tools
Answer:
Banks with less than _______ in assets are generally called community banks.
a. more than $1 billion
b. less than $1 billion
c. more than $5 million
d. less than $1 trillion
e. more than $1 trillion
Answer:
National and state charters are available for all of the following except:
a. credit unions.
b. commercial banks.
c. savings associations.
d. Federal Reserve banks.
e. National and state charters are available for all of the above.
Answer:
If a bond is selling at a premium, then:
a. the yield to maturity is less than the coupon rate.
b. the yield to maturity is greater than the coupon rate.
c. the yield to maturity is equal to the coupon rate.
d. its duration must be greater than its maturity.
e. its duration must be equal to its maturity.
Answer:
The Federal Reserve has Reserve Banks and branches in ___ districts across the
country.
a. 10
b. 12
c. 14
d. 16
e. 18
Answer:
Bank holding companies and financial holding companies generally do not pay income
tax because:
a. they are always chartered as non-profit corporations.
b. most of their income is subsidiary paid dividends, of which 80% is tax-exempt.
c. the subsidiaries always operate at a net loss.
d. bank holding companies must carry deposit insurance.
e. bank holding companies are not subject to Internal Revenue Service regulations.
Answer:
Which of the following would require a short hedge?
a. The bank has a positive gap in three months.
b. The bank anticipates receiving the repayment of a $30 million loan in 2 months. The
funds will be rolled over immediately.
c. The bank is going to invest a large amount of money in Treasury bills.
d. The bank has a negative duration gap.
e. The bank plans to roll variable-rate CDs over into fixed-rate CDs.
Answer:
A bank that deals primarily with commercial customers is called:
a. an Edge Act bank.
b. a retail bank.
c. a wholesale bank.
d. a uniform bank.
e. a liability bank.
Answer:
All of the following are basic sources of cash flows except:
a. liquidating assets.
b. cash flows from operations.
c. issuing new equity.
d. liquidating liabilities.
e. issuing new debt.
Answer:
The Expedited Funds Availability Act stipulates that local checks typically must be
cleared in no more than _____ business days.
a. 1
b. 2
c. 3
d. 4
e. 5
Answer:
To decrease asset sensitivity, a bank can:
a. buy longer-term securities.
b. pay premiums on subordinated debt.
c. shorten loan maturities.
d. make fewer fixed rate loans.
e. All of the above.
Answer:
Which of the following does not affect net interest income?
a. Changes in the level of interest rates.
b. Changes in the volume of earning assets.
c. Changes in the portfolio mix of earning assets.
d. The yield curve changing from upward sloping to inverted.
e. All of the above affect net interest income.
Answer:
Noninterest-checking accounts are called:
a. Automatic transfer from savings accounts.
b. NOW accounts.
c. demand deposit accounts.
d. repurchase accounts.
e. whole-tail accounts.
Answer:
Approximately what percentage of commercial banks are currently considered well
capitalized at the end of 2007?
a. 97%
b. 87%
c. 77%
d. 67%
e. 57%
Answer:
If rate-sensitive assets equal $500 million and rate-sensitive liabilities equals $400
million, what is the expected change in net interest income if rates fall by 1%?
a. Net interest income will increase by $1 million.
b. Net interest income will fall by $1 million.
c. Net interest income will increase by $10 million.
d. Net interest income will fall by $10 million.
e. Net interest income will be unchanged.
Answer:
Which of the following is not a criticism against granting commerce companies
industrial loan company charters?
a. There should be a separation between commerce and banking to protect customers
from potential conflicts of interest.
b. Firms could become so large and powerful that they might dominate business in
many communities.
c. Industrial loan companies are not subject to the same regulations as commercial
banks.
d. All of the above are criticisms against granting commerce companies industrial loan
company charters
e. a. and b. only
Answer:
Which of the following is not one of the Fed’s monetary policy tools?
a. Open market operations
b. Changes in the fed funds rate
c. Changes in the discount rate
d. Changes in the required reserve ratio
e. All of the above are monetary policy tools of the Fed
Answer: