When an issuer of securitized loans divides them into different risk classes or tranches,
they are providing an:
A. internal credit enhancement
B. external credit enhancement
C. internal liquidity enhancement
D. external liquidity enhancement
E. None of the options is correct.
Answer:
Which of the following is one of the common services provided by banks on the
internet today?
A. Applying for a loan
B. Applying for a new savings account
C. Making payments (especially recurring utility bills)
D. All the options are correct
E. None of the options are correct
Answer:
Which of the following is one of the few states that has opted out of interstate banking?
A. New York
B. Ohio
C. Texas
D. Montana
E. None of the options are correct
Answer:
An interest rate collar:
A. combines a rate floor and a rate cap into one agreement.
B. ranges in maturity from a few days to a few weeks.
C. protects a lender from rising interest rates.
D. All of the options are correct.
E. ranges in maturity from a few days to a few weeks and protects the lender from
rising interest rates.
Answer:
Which of the following country’s banks were owned by the state until the 1990’s?
A. Belgium
B. France
C. Germany
D. Italy
E. None of the options are correct
Answer:
As per the __________________ strategy, financial-service managers set
interest-sensitive gap as close to zero as possible to reduce the expected volatility of net
interest income.
A. aggressive GAP management
B. defensive GAP management
C. cumulative GAP management
D. weighted GAP management
E. asset-sensitive GAP management
Answer:
Credit is extended to a company up to one year to purchase raw materials and cover a
seasonal peak need for cash. What type of loan is this?
A. Interim Construction Financing
B. Working capital loan
C. Security dealer financing
D. Revolving credit financing
E. None of the options is correct.
Answer:
An example of a contra-asset account is:
A. loan and lease loss allowance.
B. trading account assets.
C. buildings and equipment.
D. revenue bonds.
E. provision for loan loss.
Answer:
Which of the following is an indicator of increasing capital risk in a bank?
A. Rise in the market yields on debt issued by a bank and market yields on government
securities of similar maturities
B. Fall in the ratio of stock price per share to earnings per share
C. Decline in the ratio of equity capital to total assets
D. Increase in purchased funds as a percentage of total liabilities
E. All of the options are correct.
Answer:
When a foreign branch lends a Euro deposit to its home office in the U.S., how is this
listed on the balance sheet of the home office?
A. Loan from subsidiary
B. Liabilities to foreign branches
C. Securities sold under agreement to repurchase
D. Bankers acceptance
E. None of the options is correct
Answer:
When analyzing a commercial loan credit request, which of the following statements is
(are) correct?
A. The lender should check qualifications of the borrowing firm’s management.
B. The lender should evaluate the potential expenses incurred to service the loan.
C. The lender should check whether adequate insurance coverage will be secured.
D. The lender should consider the trends in market demand.
E. All of the options are correct.
Answer:
Securities purchased to provide short-term profits from short-term price movements are
reported as:
A. investment securities.
B. trading account assets.
C. reverse repurchase agreements.
D. due from depository institutions.
E. federal funds.
Answer:
Which of the following statements is true regarding Subchapter S firms?
A. These firms are liable to pay federal income taxes.
B. These firms cannot have more than 100 shareholders.
C. These firms need to pass-through at least half of their earnings to their shareholders.
D. Income from these firms is tax-exempt for its shareholders.
E. All of the options are true for Subchapter S firms.
Answer:
A conventional Repurchase Agreement (RP) is ________ for the borrower than (as) a
General Collateral Finance RP.
A. more flexible
B. less flexible
C. as flexible
D. less rigid
E. None of the options is correct
Answer:
A bank expects to pay a dividend of $3.45 next year and growth rate on dividends to be
7%. If the appropriate discount rate is 15%, what should the bank’s stock price be in the
market?
A. $23.00
B. $43.13
C. $46.14
D. $49.29
E. $24.61
Answer:
Short-term lending to support the construction of homes, apartments, office buildings,
shopping centers, and other permanent structures is known as a (or an):
A. self-liquidating.
B. working capital loan.
C. interim construction loan.
D. asset-based loan.
E. None of the options is correct.
Answer:
Brian Smith, the CEO of Carter National Bank, anticipates that interest rates may fall in
the future and as a result buys $100 million in 30 year Treasury Bonds for the bank’s
security portfolio. Instead, interest rates rise, causing the value of these bonds to fall.
This would be an example of which of the following types of risk?
A. Operational risk
B. Legal risk
C. Compliance risk
D. Strategic risk
E. Reputation risk
Answer:
First National Bank’s stock is currently selling at $40 per share and the bank recently
reported earnings per share of $4.50 on its 200,000 shares outstanding. Second National
Bank has 150,000 shares outstanding, with a current market price of $30 per share. It
just reported its earnings per share of $5. If First National acquires Second National in a
stock purchase, with the two banks agreeing to exchange stock at the current market
prices, and post-merger earnings are expected to be $1,800,000, what is the expected
EPS post merger?
A. $4.36
B. $5.76
C. $5.28
D. $5.14
E. None of the options is correct
Answer:
Which of the following would not be considered a bank-qualified municipal security?
A. A Columbia County general obligation bond to modernize the county fire
department
B. A Bucks 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 Chicopee general obligation bond to pay for a new city jail
E. A Treasury bond to finance government debt
Answer:
The Hollingsworth National Bank maintains an average clearing balance of $7,000,000
with the Federal Reserve. The Federal Funds rate is currently 5.25 percent. What is the
credit the bank will earn over the maintenance period that can be used to offset any fees
charged by the Federal Reserve?
A. $367,500
B. $1,021
C. $14,292
D. $30,625
E. None of the options is correct
Answer:
Dollar denominated CDs issued by banks outside the United States are known as:
A. Domestic CDs.
B. Euro CDs.
C. Yankee CDs.
D. Commercial paper.
E. None of the options is correct.
Answer:
About a quarter of all commercial banks in the U.S. are:
A. investment banks
B. branch banks
C. unit banks
D. virtual banks
E. bank holding companies
Answer:
A bank is considering making a loan to Sam Snape. Mr. Snape has $1,000 in the bank
right now but generally keeps a balance of $4,500 most of the year. What aspect of
evaluating a consumer loan application is this fact concerned with?
A. Character and purpose
B. Income level
C. Deposit balance
D. Employment and residential stability
E. Pyramiding of debt
Answer:
You know the following information about the Taylor National Bank:
Given this information, what is the value of this firm’s net interest income?
A. $150
B. $210
C. $400
D. ($250)
E. $750
Answer:
A bank is required to maintain an average daily balance at the Fed of $600 million. In
the first 2 days of the maintenance period, it maintains a balance of $450 million, the
next three days it maintains a balance of $700 million, the next two days it maintains a
balance of $650 million, the next three days it maintains a balance of $450 million, and
the next three days it maintains a balance of $650 million. What does its balance at the
Fed has to be on the last day of the maintenance period in order to have a zero
cumulative reserve deficit?
A. $600 million
B. $400 million
C. $500 million
D. $800 million
E. None of the options is correct
Answer:
Which of the following is an example of a longer-term nondeposit funding source?
A. Money market funds
B. Repurchase agreements
C. Capital notes and debentures
D. Negotiable CDs
E. None of the options is correct
Answer:
Which of the following are the reasons for having the government set capital standards
for financial institutions as opposed to letting the private marketplace set those
standards?
A. To preserve public confidence
B. To remove each bank’s unique asset risk exposure
C. To limit losses to the federal government arising from deposit insurance claims
D. To preserve public confidence and to limit losses to the federal government arising
from deposit insurance claims
E. None of the options is correct.
Answer:
The number of bank charters issued annually in the United States averages about:
A. 1,000
B. 2,000
C. 10
D. 100
E. None of the options are correct
Answer:
A lender’s secondary source of repayment in case of a default is:
A. capacity.
B. collateral.
C. character.
D. capital.
E. credit.
Answer:
In recent years, banks have been __________ profitable than (as) S&Ls and Savings
Banks.
A. more
B. less
C. as
D. much more
E. much less
Answer:
If Fifth National Bank’s asset duration exceeds its liability duration and if interest rates
rise, the bank’s net worth will _________________.
A. decrease
B. increase
C. stabilize
D. be unaffected
E. None of the options is correct.
Answer:
A bank currently has $150 million in “hot money” deposits against which it wants to
hold an 80 percent reserve and $90 million in vulnerable deposits against which it
wants to hold a 30 percent reserve. It also has $45 million in stable deposits against
which it wants to hold a 5 percent reserve. Legal reserves for the bank are 5 percent of
all deposits. What is the bank’s liability liquidity reserve?
A. $149.25 million
B. $285 million
C. $141.7875 million
D. $216.60 million
E. None of the options is correct
Answer:
The amount paid over the current stock price to shareholders of the acquired firm by the
acquiring bank in a merger is known as ___________________________.
Answer:
Claims against the expected income and principal generated by a pool of similar type of
loans are known as ________________________.
Answer:
The customer that is requesting a standby letter of credit is known as the __________.
Answer:
A bank that is not owned by a holding company is called a(n) ______________ bank.
Answer:
A(n) ______________ is a written contract signed by a borrower and states the
principal amount of the loan, the interest rate on the loan, and the terms under which
repayment must take place.
Answer:
In the _____________ approach to managing liquidity, deposits and other sources of
funds are divided into categories and, then liquidity managers must set aside liquid
funds according to some desired operating rule.
Answer:
The ______________________ issues charters for new national banks.
Answer:
A(n) ______________________ is the purchase of a publicly traded company by a
small group of investors. These investors often borrow very heavily to finance the
purchase of the stock of the company.
Answer:
The _____________________ was created as part of the Glass-Steagall Act. In the
beginning it insured deposits up to $2,500.
Answer:
An approach that divides the cash flows of a firm into three principal sources, namely
cash flow from operations, cash flow from financing activities, and cash flow from
investing activities, is known as the _____________ cash flow method.
Answer:
If a bank can show that the merger it proposes results in significant
______________________________, it may be able to overcome anticompetitive
problems of the merger. This is the impact the merger has upon the convenience and
service needs of the community.
Answer:
Debt instruments issued by cities, states, and other political entities and which are
exempt from federal taxes are collectively known as ________________________.
Answer:
One new type of mortgage where no principal payments are made for an initial period is
called a(n) _______________.
Answer:
Net profit margin can be split into two parts, ________________________ and tax
management efficiency. The first part is pre-tax net operating income over total
operating revenue which looks at how many dollars of revenue survive after operating
expenses are removed.
Answer:
A security issued by the federal government with greater than 10 years to maturity at
the time of issue is called a(n) _______________.
Answer:
A(n) _________________________ requires a bank to honor withdrawals immediately
upon request.
Answer:
__________ is a hybrid form of debt and equity capital issued to investors.
Answer:
The acronym ACH stands for _____________.
Answer: