What is 1st State’s return on equity?
a. 0.6%
b. 3.8%
c. 5.0%
d. 8.2%
e. 9.8%
Answer:
If a bond is selling at par value, 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:
Which of the following is not true regarding collateralized mortgage obligations
(CMOs)?
a. Interest earned on CMOs is exempt from state income taxes.
b. CMO yields are generally higher than comparable Treasury yields.
c. CMOs exhibit little default risk.
d. All of the above are true.
e. Only a. and c. are true.
Answer:
What is the weighted average duration of assets?
a. 2.56 years
b. 3.85 years
c. 4.85 years
d. 5.00 years
e. 7.5 years
Answer:
Which of the following would not be considered a bank qualified municipal security?
a. A Hays County general obligation bond to modernize the county fire department.
b. A Lubbock County general obligation bond to build a new sewer plant.
c. A City of San Marcos general obligation bond to pay for street repairs.
d. A City of El Paso general obligation bond to pay for a new city jail.
e. A State of Texas bond to finance road repairs.
Answer:
An “independent” bank is:
a. an “independent” subsidiary of a multi-bank holding company.
b. another name for a one-bank holding company.
c. a bank that is exempt from paying federal income taxes.
d. a bank that is specifically created to underwrite corporate debt issues.
e. not controlled by a multi-bank holding company or any other outside interest.
Answer:
Which of the following is not a purpose of bank regulation?
a. Guarantee minimal profitability of the banking system.
b. Provide monetary stability.
c. Ensure safety and soundness of banks.
d. Provide a competitive financial system.
e. Protect consumers from abuses by banks.
Answer:
Which of the following is true regarding subordinated debt?
a. Subordinated debt claims come before the claims of depositors.
b. Principal payments are not mandatory.
c. Transaction costs on issuing new debt are lower than when issuing new equity.
d. Interest payments on subordinated debt are tax-deductible.
e. New subordinated debt dilutes existing shareholder equity.
Answer:
A bond that has positive convexity:
a. is more price sensitive when rates fall then when rates rise.
b. is more price sensitive when rates rise then when rates fall.
c. has a negative duration.
d. has a duration greater than maturity.
e. a. and d.
Answer:
What is the market value of a zero coupon bond with a face value of $1,000 and 20
years to maturity, assuming an annual discount rate of 7%?
a. $100.00
b. $258.42
c. $502.57
d. $1,000.00
e. None of the above
Answer:
____________ of financial futures contracts require physical delivery.
a. Nearly 100%
b. Approximately 75%
c. Approximately 50%
d. Approximately 25%
e. Less than 1%
Answer:
The Expedited Funds Availability Act stipulates that non-local checks typically must be
cleared in no more than _____ business days.
a. 1
b. 2
c. 3
d. 4
e. 5
Answer:
Which of the following is not a characteristic of a typical commercial bank?
a. Most banks own few fixed assets.
b. Most banks have a high degree of operating leverage.
c. Most banks have few fixed costs.
d. Many bank liabilities are payable on demand.
e. Banks generally operate with less equity capital than non-financial firms.
Answer:
Savings and loans have historically specialized in:
a. commercial loans.
b. auto loans.
c. mutual loan.
d. real estate loans.
e. demand deposit accounts.
Answer:
______________ represent amounts owed by Goldman Sachs to brokers, the firm’s
customers, and counter-parties to derivative contracts.
a. collateralized agreements
b. financial instruments
c. collateralized financings
d. receivables
e. payables
Answer:
A bank estimates that their average balance on demand deposit accounts is $2,500, net
of float. Each account costs the bank $175 per year in processing costs. The bank
collects an average of $5 per month on each account in service charges. Assume reserve
requirements are 10%.
What is the net cost of an average demand deposit?
a. 4.5%
b. 4.8%
c. 5.1%
d. 6.8%
e. 7.0%
Answer:
A zero cost collar:
a. is risk-free.
b. is designed to offset margin requirements.
c. has a larger premium than a reverse collar.
d. designed so the buyer has no net premium payment.
e. None of the above.
Answer:
You purchase a 10-year bond at face value for $1,000. It pays a semi-annual coupon
payment of $50. If you can reinvest the coupon payments at 8% annually, what is your
expected total return?
a. 5.73%
b. 6.63%
c. 7.53%
d. 8.43%
e. 9.33%
Answer:
Controlling interest in a bank is defined as ownership or indirect control of ____ of the
voting shares in the bank.
a. 15%
b. 20%
c. 25%
d. 30%
e. 51%
Answer:
Which of the following is not an advantage of larger cash balances for a bank?
a. Larger cash balances reduce the need to borrow at the discount window.
b. Larger cash balances reduce the risk of bank runs.
c. Larger cash balances reduce the risk of paying penalties to the Federal Reserve.
d. Larger cash balances increase reserve balances.
e. Larger cash balances reduce a bank’s interest expense.
Answer:
Which of the following has the greatest weight in determining a consumer’s FICO
score?
a. Current credit use
b. Credit mix
c. Payment history.
d. Length of credit history
e. Number of applications for new credit
Answer:
When you sell a futures contract, your futures position is:
a. flat.
b. long.
c. short.
d. the same as the cash position.
e. b. and d.
Answer:
Which of the following characteristics should collateral have?
a. The value of the collateral should not exceed the value of the loan.
b. The collateral should be highly liquid.
c. The lender must be able to perfect a lien on the collateral.
d. a. and b. only.
e. b. and c. only.
Answer:
Which of the following is not considered a highly liquid asset?
a. Federal funds sold
b. 90-day Treasury bills
c. AAA-rated commercial paper
d. A Federal Home Loan Bank Board bond with 6 months until maturity
e. Repurchase agreement
Answer:
Net income is calculated as:
a. total revenue total operating expenses.
b. total revenue total operating expenses taxes.
c. asset utilization expense ratio.
d. asset utilization expense ratio tax ratio.
e. interest expense ratio non-interest expense ratio provision for loan loss ratio.
Answer:
The daily change in the value due to the marking-to-market process is know as the:
a. maintenance margin.
b. variation margin.
c. market margin.
d. initial margin.
e. marked margin.
Answer:
All of the following are components of a bank’s non-interest expense except:.
a. deposit service fees.
b. occupancy expense.
c. goodwill impairment.
d. personnel expense.
e. other intangible amortization.
Answer:
Which of the following is an example of a Eurocurrency?
a. A branch of a Canadian bank located in Paris accepts a deposit in U.S. dollars.
b. A branch of a U.S. bank located in Tokyo accepts a deposit in Japanese yen.
c. A branch of a U.S. bank located in New York accepts a deposit in U.S. dollars.
d. A branch of a London bank located in Paris accepts a deposit in Euros.
e. A branch of a Swiss bank located in Mexico City accepts a deposit in Mexican pesos.
Answer:
For a bank that has a negative 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 volume of net deferred credit is commonly referred to as:
a. the burden.
b. NOW balances.
c. reserve requirements.
d. equity.
e. float.
Answer:
A loan that is specifically designed to meet the needs of one or a few companies but has
been packaged for resale is known as a:
a. structured note.
b. staggered note.
c. struggling note.
d. marked-for-sale note.
e. specific note.
Answer:
The default risk associated with loans made to borrowers outside a bank’s home country
is called:
a. foreign exchange risk.
b. sovereign risk.
c. euro risk.
d. country risk.
e. LC risk.
Answer: