1) new futures contracts must be approved by
a.the cftc
b.the sec
c.the warren commission
d.the nyse
e.the federal reserve
2) the base loan rate accounts for
i. the firm’s cost of funds.
ii. the firm’s required return on equity.
iii. the credit risk of the loan.
a.i only
b.i and ii only
c.ii and iii only
d.i and iii only
e.i, ii, and iii
3) under erisa the maximum time period allowed for vesting is _____________ years.
a.3
b.5
c.8
d.10
e.15
4) a bank is facing a forecast of rising interest rates. how should they set the repricing
and duration gap?
a.positive repricing gap and negative duration gap
b.negative repricing gap and positive duration gap
c.positive repricing gap and positive duration gap
d.negative repricing gap and negative duration gap
5) you are considering purchasing shares in a typical mutual fund that has three classes
of shares outstanding: class a, class b, and class c. if you purchase class a shares you
will pay
a.a back-end load and no 12b-1 fees
b.a front-end load and a small 12b-1 fee
c.no front-end load but a back-end load
d.a back-end load and full 12b-1 fees
e.a front-end load and full 2b-1 fees
6) figure 22-1
a bank has the following balance sheet:
the bank’s one-year repricing gap is (million $)
a.$425
b.$285
c.$74
d.$140
e.$66
7) a _____ position in t-bond futures should be used to hedge falling interest rates and a
_____ position in t-bond futures should be used to hedge falling bond prices.
a.long; short
b.long; long
c.short; long
d.short; short
8) which one of the following is a source of liquidity risk for a bank?
a.predicted increase in net deposit drain before christmas
b.maturation of notes payable
c.corporation calls in a bond the bank is holding
d.a natural disaster in the bank’s community
e.none of the above
9) you want to buy a $250,000 house and you will use a conventional mortgage. what is
the minimum down payment you have to make to avoid having to purchase mortgage
insurance?
a.$10,000
b.$20,000
c.$30,000
d.$40,000
e.$50,000
10) the _______________ is a nationwide network jointly operated by the fed and
private institutions that electronically process credit and debit transfers of funds.
a.fedwire
b.ach
c.chips
d.nasdaq
e.swift
11) a contract that gives the holder the right to sell a security at a preset price only
immediately before contract expiration is a(n)
a.american call option
b.european call option
c.american put option
d.european put option
e.knockout option
12) the anti-money laundering provisions of the u.s.a. patriot act requires securities
firms to
i. verify the identity of any person seeking to open an account with their firm.
ii. keep separate records of accounts originating from foreign countries.
iii. determine whether the client appears on any lists of known or suspected terrorists or
terrorist organizations.
a.i only
b.iii only
c.i and ii only
d.ii and iii only
e.i, ii, and iii
13) ethanol lawn mowers issued 500,000 shares to the public. the gross proceeds were
$31,250,000 and the net proceeds were $30 million. merrel bench was the lead
underwriter and deal negotiator, but 10 other investment bankers (one of which was
golden sax) were also used to put up capital and help sell the issue. which of the
following statements is/are correct?
i. the public paid $62.50 a share.
ii. golden sax was the originating house.
iii. the spread per share was $3.50.
iv. merrel bench is the sole book running manager.
v. this offer was a syndicated deal.
a.i, ii, and iv only
b.iii and v only
c.i, iv, and v only
d.ii and iii only
e.i and v only
14) which of the following is true?
a.forward contracts have no default risk
b.futures contracts require an initial margin requirement be paid
c.forward contracts are marked to market daily
d.forward contract buyers and sellers do not know who the counterparty is
e.futures contracts are only traded over the counter
15) the largest liability of broker dealers in 2010 was
a.bank loans payable
b.short positions in securities and commodities
c.subordinated debt
d.repurchase agreements
e.equity
16) an insurance company is trying to sell you a retirement annuity. the annuity will
give you 20 payments with the first payment in 12 years when you retire. the insurance
firm is asking you to pay $50,000 today. if this is a fair deal, what must the payment
amount be (to the dollar) if the interest rate is 8%?
a.$5,093
b.$12,824
c.$9,472
d.$11,874
e.$10,422
17) a form of trust that can issue multiple class debt securities without having to pay
taxes on the interest paid is called a
a.cmo
b.remic
c.mbb
d.pip
e.gnma
18) on the nasdaq system, the inside quotes are the
a.lowest ask and lowest bid
b.lowest bid and highest ask
c.highest bid and highest ask
d.highest bid and lowest ask
e.none of the above
19) if interest rate parity holds and the annual german nominal interest rate is 3% and
the u.s. annual nominal rate is 5% and real interest rates are 2% in both countries, then
inflation in germany is about _______________ than in the united states.
a.1% higher
b.2% higher
c.1% lower
d.4% lower
e.2% lower