Which of the following institutions is not part of the modern banking system?
a. credit unions
b. savings and loan associations
c. mutual funds
d. mutual savings banks
60. Which of the following statements is most correct?
a. A weaker dollar results in more imports of foreign merchandise since it requires
fewer dollars for purchase.
b. A stronger dollar results in fewer imports of foreign merchandise since it requires
fewer dollars for purchase.
c. A stronger dollar results in more imports of foreign merchandise since it requires
more dollars for purchase.
d. A weaker dollar results in more imports of foreign merchandise since it requires more
dollars for purchase.
e. none of the above
Which of the following constitute default on a bond?
a. nonpayment of par value
b. nonpayment of coupon
c. violation of the indenture
d. all the above
e. none of the above
Which of the following statements is false?
a. It is not possible for a bank to invest all of its funds in profitable loans or securities.
b. All states now permit statewide branch banking.
c. Regulation Q established interest rate ceilings on time and savings deposits.
d. The depositors of a bank are creditors and hence have a claim that is superior to that
of stockholders in the event of liquidation.
All of the following are true regarding mortgage backed securities except:
a. A mortgage-backed security is a debt security created by pooling together a group of
mortgage loans whose periodic payments belong to the holders of the security.
b. Some mortgage-backed securities €pass through€ the interest and principal payments
to the owners of the securities.
c. Payments on the underlying mortgages are made to the financial institution that
created the mortgage-backed security, and the institution, in turn, pays or passes
through the payments to the investors or owners of the securities.
d. In some mortgage-backed securities, the issuer separates or €strips€ the interest and
principal payment streams into separate securities.
e. all of the above statements are true
The rate of interest actually paid or earned, also called the annual percentage rate
(APR), is the ________ interest rate.
a. effective.
b. stated.
c. discounted.
d. continuous.
Because of the financial crisis that began in 2008, by the end of 2009:
a. unemployment was in excess of 10 percent
b. many homeowners owed more money on their mortgage loans than the their homes
were worth
c. home mortgage foreclosure rates and personal and business bankruptcies were
increasing
d. over 100 banks in the U.S. had already failed with over 500 more being considered
financially weak
e. all of the above are true
The goal of a company’s cash management policy is to
a. increase the cash conversion cycle.
b. increase the payment period.
c. minimize the cash requirement.
d. maximize cash outflows.
During the colonial period in the nation’s history, banks depended on:
a. their own issue of paper money
b. foreign sources for their loanable funds
c. deposits of foreign currency such as the Spanish dollar
d. the investment of their own stockholders
The largest providers of short-term financing are:
a. commercial banks
b. commercial finance companies
c. factors
d. none of the above
Compensation for those financial debt instruments that cannot be easily converted to
cash at prices close to estimated fair market values is termed:
a. liquidity premium
b. market risk premium
c. maturity premium
d. none of the above
Which of the following statements is most correct?
a. Marketable government securities are those securities that cannot be transferred to
other persons or institutions and can be redeemed only by being turned in to the U.S.
government
b. Nonmarketable government securities are those securities that can be transferred to
other persons or institutions and can be redeemed only by being turned in to the U.S.
government
c. Nonmarketable government securities are those securities that cannot be transferred
to other persons or institutions and can be redeemed only by being turned in to the U.S.
government
d. none of the above
A market is liquid if
a. trades are executed quickly.
b. market prices don’t fluctuate sharply on successive trades
c. both a) and b) are correct.
d. if fees are low.
The most important savings surplus unit in the economy is:
a. the savings of individuals
b. corporate savings
c. U.S. government savings
d. state and local government savings
Newly created securities are sold in the:
a. primary market
b. secondary market
c. third market
d. fourth market
The Sarbanes-Oxley Act of 2002 was passed by the U.S. Congress in response several
ethical scandals.
A firm’s business risk is measured by its variability in EBIT over time.
The market value ratios indicate the financial markets’ assessment of the value of a
firm’s securities.
Fannie Mae was created to support the financial markets by purchasing home
mortgages and automobile loans from banks so that the proceeds could be lent to other
borrowers.
The Rule of 72 is an estimate of how long it would take to double a sum of money at a
given interest rate.
A higher-risk project needs to be evaluated using a lower required rate of return.
For a given discount rate, an ordinary annuity and an annuity due have the same present
value.
The Glass-Steagall Act of 1933 ended the ability of commercial banks to act as
underwriters of newly issued securities.
Money markets are where debt securities with maturities of one year or more are issued
and traded.
Agency costs are the tangible and intangible expenses borne by shareholders because of
the actual or potential self-serving actions of managers; and agency costs can include
explicit, out-of-pocket expenses.