Question 1

A few U.S. commercial banks are allowed to have "section 20 affiliates" that can

Accepted Answer

A)  underwrite corporate debt and equity. 
B)  operate in foreign markets. 
C)  branch nationwide regardless of state laws. 
D)  own majority shares in other banks. 
A)  underwrite corporate debt and equity. 
B)  operate in foreign markets. 
C)  branch nationwide regardless of state laws. 
D)  own majority shares in other banks.

Question 2

Because transactions deposits can be withdrawn at any time, banks are exposed to

Accepted Answer

A)  credit risk. 
B)  liquidity risk. 
C)  trading risk. 
D)  interest risk. 
A)  credit risk. 
B)  liquidity risk. 
C)  trading risk. 
D)  interest risk.

Question 3

A bank's net interest margin is

Accepted Answer

A)  total interest income minus total interest expense. 
B)  net interest income as a percent of bank equity. 
C)  net interest income as a percent of total bank assets. 
D)  net interest as a percent of total income. 
A)  total interest income minus total interest expense. 
B)  net interest income as a percent of bank equity. 
C)  net interest income as a percent of total bank assets. 
D)  net interest as a percent of total income.

Question 4

A 25-year floating rate mortgage has its rate adjusted twice a year. This gives it a re-pricing maturity of

Accepted Answer

A)  six months. 
B)  twenty-four years and six months. 
C)  twenty-five years. 
D)  fifty years. 
A)  six months. 
B)  twenty-four years and six months. 
C)  twenty-five years. 
D)  fifty years.

Question 5

A package of nontraded financial instruments can be transformed into a traded financial instrument through the process of

Accepted Answer

A)  collateralization. 
B)  repurchasing. 
C)  securitization. 
D)  underwriting. 
A)  collateralization. 
B)  repurchasing. 
C)  securitization. 
D)  underwriting.

Question 6

The Bahamas and Cayman Islands are known for their warm, sandy beaches and their

Accepted Answer

A)  Edge Act corporations. 
B)  shell banks. 
C)  section 20 affiliates. 
D)  high taxation. 
A)  Edge Act corporations. 
B)  shell banks. 
C)  section 20 affiliates. 
D)  high taxation.

Question 7

A bank's net interest income is

Accepted Answer

A)  the same as net operating income. 
B)  the difference between interest on loans and interest expense. 
C)  the same as net operating income before expenses. 
D)  the difference between total interest income and interest expense. 
A)  the same as net operating income. 
B)  the difference between interest on loans and interest expense. 
C)  the same as net operating income before expenses. 
D)  the difference between total interest income and interest expense.

Question 8

A bank can lower its leverage risk by

Accepted Answer

A)  issuing more stock. 
B)  buying more securities and making fewer loans. 
C)  more closely matching the average maturity of its assets and liabilities. 
D)  taking in fewer deposits and relying more in miscellaneous liabilities to raise funds. 
A)  issuing more stock. 
B)  buying more securities and making fewer loans. 
C)  more closely matching the average maturity of its assets and liabilities. 
D)  taking in fewer deposits and relying more in miscellaneous liabilities to raise funds.

Question 9

IBFs are designed to compete with

Accepted Answer

A)  Eurobonds. 
B)  off-balance-sheet activities. 
C)  shell branches. 
D)  letters of credit. 
A)  Eurobonds. 
B)  off-balance-sheet activities. 
C)  shell branches. 
D)  letters of credit.

Question 10

The trend in the mortgage-backed securities (MBS)market in the early 2000s was toward more

Accepted Answer

A)  subprime mortgages. 
B)  prime mortgages 
C)  bubble mortgages. 
D)  low-risk mortgages 
A)  subprime mortgages. 
B)  prime mortgages 
C)  bubble mortgages. 
D)  low-risk mortgages

Question 11

In 2007 ROA for banks in the United States stood at a little under __________ percent.

Accepted Answer

A)  one 
B)  five 
C)  eight 
D)  twenty 
A)  one 
B)  five 
C)  eight 
D)  twenty

Question 12

What type of loan led the wave of bank lending in the 1970s and 1980s?

Accepted Answer

A)  consumer loan 
B)  commercial mortgage 
C)  loans to state and local governments 
D)  commercial paper 
A)  consumer loan 
B)  commercial mortgage 
C)  loans to state and local governments 
D)  commercial paper

Question 13

Credit unions made it through the 1980s in relatively good shape because

Accepted Answer

A)  most of their depositors were individuals. 
B)  most of their depositors were businesses. 
C)  they held many mortgages among their assets. 
D)  they held no mortgages among their assets. 
A)  most of their depositors were individuals. 
B)  most of their depositors were businesses. 
C)  they held many mortgages among their assets. 
D)  they held no mortgages among their assets.

Question 14

A stand-by letter of credit issued by a bank is __________ of that bank.

Accepted Answer

A)  an asset 
B)  a liability 
C)  technically both an asset and a liability 
D)  neither an asset nor a liability 
A)  an asset 
B)  a liability 
C)  technically both an asset and a liability 
D)  neither an asset nor a liability

Question 15

The ratio of equity to total assets is a measure of a bank's __________ risk.

Accepted Answer

A)  credit 
B)  leverage 
C)  interest rate 
D)  liquidity 
A)  credit 
B)  leverage 
C)  interest rate 
D)  liquidity

Question 16

Banks are prohibited from holding __________ in their portfolio of assets.

Accepted Answer

A)  commercial paper 
B)  local government securities 
C)  farm mortgages 
D)  corporate stock 
A)  commercial paper 
B)  local government securities 
C)  farm mortgages 
D)  corporate stock

Question 17

A bank's net interest income is roughly analogous to a manufacturing firm's

Accepted Answer

A)  total reserves. 
B)  gross profit. 
C)  total cost. 
D)  gross interest income. 
A)  total reserves. 
B)  gross profit. 
C)  total cost. 
D)  gross interest income.

Question 18

Conventional wisdom holds that there are __________ in banking.

Accepted Answer

A)  economies of scope but not scale 
B)  economies of scale but not scope 
C)  economies of both scope and scale 
D)  neither scope nor scale economies 
A)  economies of scope but not scale 
B)  economies of scale but not scope 
C)  economies of both scope and scale 
D)  neither scope nor scale economies

Question 19

The ratio of cash and securities to total assets is a traditional measure of __________ risk.

Accepted Answer

A)  credit 
B)  leverage 
C)  interest rate 
D)  liquidity 
A)  credit 
B)  leverage 
C)  interest rate 
D)  liquidity

Question 20

Which of these qualifies as a "miscellaneous liability" of a bank?

Accepted Answer

A)  repurchase agreements 
B)  negotiable CDs 
C)  transactions deposits 
D)  savings deposits 
A)  repurchase agreements 
B)  negotiable CDs 
C)  transactions deposits 
D)  savings deposits

Exam 12: Depository Financial Institutions

A few U.S. commercial banks are allowed to have "section 20 affiliates" that can

Because transactions deposits can be withdrawn at any time, banks are exposed to

A bank's net interest margin is

A 25-year floating rate mortgage has its rate adjusted twice a year. This gives it a re-pricing maturity of

A package of nontraded financial instruments can be transformed into a traded financial instrument through the process of

The Bahamas and Cayman Islands are known for their warm, sandy beaches and their

A bank's net interest income is

A bank can lower its leverage risk by

IBFs are designed to compete with

The trend in the mortgage-backed securities (MBS)market in the early 2000s was toward more

In 2007 ROA for banks in the United States stood at a little under __________ percent.

What type of loan led the wave of bank lending in the 1970s and 1980s?

Credit unions made it through the 1980s in relatively good shape because

A stand-by letter of credit issued by a bank is __________ of that bank.

The ratio of equity to total assets is a measure of a bank's __________ risk.

Banks are prohibited from holding __________ in their portfolio of assets.

A bank's net interest income is roughly analogous to a manufacturing firm's

Conventional wisdom holds that there are __________ in banking.

The ratio of cash and securities to total assets is a traditional measure of __________ risk.

Which of these qualifies as a "miscellaneous liability" of a bank?

Introducing Money, Banking, and Financial Markets

The Role of Money in the Macroeconomy

Financial Instruments, Markets, and Institutions

Interest Rate Measurement and Behavior

The Term and Risk Structure of Interest Rates

The Structure and Performance of Securities Markets

The Pricing of Risky Financial Assets

Money and Capital Markets

Demystifying Derivatives

Understanding Foreign Exchange

The Nature of Financial Intermediation

Nondepository Financial Institutions

Understanding Financial Contracts

The Regulation of Markets and Institutions

Financial System Design

Who's in Charge Here?

Bank Reserves and the Money Supply

The Instruments of Central Bankin

Understanding Movements in Bank Reserves

Monetary Policy Strategy

The Classical Foundations

The Keynesian Framework

The ISLM World

Money and Economic Stability in the ISLM World

An Aggregate Supply and Demand Perspective on Money and Economic Stability

Rational Expectations: Theory and Policy Implications

Empirical Evidence on the Effectiveness of Monetary Policy

Tying It All Together

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