1) the cash surrender value of a life insurance policy is the present value of expected
future payouts on the policy.
2) the greater the discount required to sell assets quickly, the higher the value of the
bank’s liquidity index.
3) in ratio analysis, the profit margin times the asset utilization ratio equals return on
assets.
4) the buyer of a loan in a participation has a double-risk exposure: one to the borrower
and one to the selling bank.
5) load funds typically provide investors with higher rates of return and offer more
services such as check writing, transfers between funds, etc., than no load funds.
6) savings institution deposits and bank deposits are backed by two different insurance
funds.
7) if the fomc wished to generate faster economic growth, they could issue a policy
directive to the federal reserve board trading desk to purchase u.s. government
securities.
8) the process of creating a secondary market for securities or contracts is termed
brokerage.
9) the majority of banks are nationally chartered and insured by the fdic.
10) the securities investor protection corporation protects investors against losses due to
unfavorable market moves of up to $500,000.
11) a corporate borrower failing to repay a loan on time due to equipment breakdowns
is an example of firm specific credit risk.
12) futures or option exchange members who take positions on contracts for only a few
moments are called scalpers.
13) the securities investor protection corporation protects investors against losses due to
unfavorable market moves of up to $500,000.
14) the primary asset for p&c insurers are bonds.
15) the largest single category of loans on the typical bank’s balance sheet in 2010 was
a.u.s. government securities
b.commercial and industrial loans
c.consumer loans
d.real estate loans
e.interbank loans
16) interest rate risk is probably greatest at which of the following intermediaries?
a.commercial banks
b.savings institutions
c.life insurers
d.pension funds
17) day-to-day trading practices of securities firms currently may be regulated by which
of the following?
i. finra
ii. sec
iii. federal reserve
iv. sipc
a.i only
b.ii only
c.i and ii only
d.i and iii only
e.ii and iv only
18) the £ is worth 1.2569 euros and the euro is worth $1.5568. statistical analysis
indicates that when the euro rises 1% against the dollar, the pound rises 0.5% against
the euro and vice versa. a u.s. bank has assets of £40 million that mature in one year
funded with liabilities of 55 million due in 6 months. the bank would be hurt by:
i. an increase in the value of the euro against the dollar.
ii. a decrease in the value of the euro against the dollar.
iii. an increase in euro interest rates relative to pound interest rates.
iv. an increase in pound interest rates relative to euro interest rates.
a.i only
b.i and ii only
c.i and iii only
d.ii and iv only
e.ii and iii only
19) the terrorist attacks on the world trade center in 2001 are an example of
______________.
a.regulatory risk
b.liquidity risk
c.credit risk
d.insolvency risk
e.event risk
20) plains national bank has interest income of $250 million and interest expense of
$110 million, noninterest income of $40 million and noninterest expense of $65 million
on earning assets of $3,900 million. what is plains’ overhead efficiency ratio?
a.61.54%
b.44.00%
c.9.23%
d.42.45%
e.37.46%
21) a t-bond with a $1000 par is quoted at a bid of 105:7 and an ask of 105:9 . if you
sell the bond you will receive
a.$1,052.81
b.$1,052.19
c.$1,057.22
d.$1,059.22
e.none of the above
22) a best efforts offering is one where
a.the underwriter bears the risk of an unsuccessful offering
b.the bid-ask spread is exceptionally high, but the investment banker does their best to
sell the issue anyway
c.the investment banker acts as a principal for the issuer
d.the investment banker acts only as a distribution agent
e.the issue can only be privately placed
23) employee plus employer contributions to a 401(k) are $15,000 per year. equity
funds are earning 15%, bond funds 8%, and money market funds 6%. the employee
wants to retire as soon as possible with $1 million in retirement assets. if he puts 50%
of his money in stocks, 30% in bonds, and 20% in money funds, how long until he can
expect to retire?
a.3.3 years
b.9.7 years
c.4.6 years
d.2.4 years
e.12.2 years
24) which of the following could result in a negative nim?
a.growth in net interest income
b.lower non interest expense
c.decline in net interest income
d.higher non interest income
e.positive net interest spread
25) in a three-class sequential pay cmo, if we consider class b holders as having average
prepayment risk, then class a holders have _____________ prepayment risk and class c
holders have _____________ prepayment risk.
a.above average; below average
b.below average; below average
c.below average; above average
d.above average; above average
26) discuss the four layers of regulation designed to preserve the safety and soundness
of dis.
27) how do federal reserve banks generate income? do they require supplemental
funding from congress?
28) a stock is priced at $27. an american call option on this stock with a $25 strike must
be worth at least how much? numerically show why.
29) what are the major advantages that credit unions enjoy over banks?
30) a u.s. firm is earning british pounds from its foreign subsidiary. a u.k. firm is
earning dollars from its u.s. subsidiary. neither firm can borrow at a cost-effective rate
outside of its home country/currency. what kind of swap could be used to limit the fx
risk of both firms and explain the payment flows involved (be specific)?
31) what are the major effects of the sarbanes-oxley act (so) of 2002 on the stock
markets? what else has the nyse done to improve corporate governance?