Question 1

State banks are regulated by the Comptroller of the Currency.

Accepted Answer

A) True 
 B)False  False

Question 2

The Financial Reform Act (Wall Street Reform and Consumer Protection Act or Dodd-Frank Act)of 2010

Accepted Answer

A) ended the system of risk-based insurance premiums. 
B) set requirements for the Deposit Insurance Fund's reserves. 
C) raised the limit for insured deposits to $750,000 per depositor. 
D) allowed large insurance companies such as American International Group to compete with the FDIC to insure bank deposits. 
A) ended the system of risk-based insurance premiums. 
B) set requirements for the Deposit Insurance Fund's reserves. 
C) raised the limit for insured deposits to $750,000 per depositor. 
D) allowed large insurance companies such as American International Group to compete with the FDIC to insure bank deposits. B

Question 3

During the credit crisis, the U.S. government purchased the common stock of the largest banks in order to inject funds into the banks and cushion their losses.

Accepted Answer

A) True 
 B)False  False

Question 4

The Garn-St Germain Act of 1982

Accepted Answer

A) permitted depository institutions to offer money market deposit accounts. 
B) prevented depository institutions from acquiring problem institutions across geographic boundaries. 
C) required the Fed to explicitly charge depository institutions for its services. 
D) allowed the Fed to provide check clearing to depository institutions at no charge. 
A) permitted depository institutions to offer money market deposit accounts. 
B) prevented depository institutions from acquiring problem institutions across geographic boundaries. 
C) required the Fed to explicitly charge depository institutions for its services. 
D) allowed the Fed to provide check clearing to depository institutions at no charge.

Question 5

In making loans to a single customer, commercial banks ____ restricted to a maximum percentage of their capital, and they ____ allowed to use borrowed or deposited funds to purchase common stock.

Accepted Answer

A) are; are 
B) are; are not 
C) are not; are 
D) are not; are not 
A) are; are 
B) are; are not 
C) are not; are 
D) are not; are not

Question 6

Deposit insurance has a limit of

Accepted Answer

A) $10,000. 
B) $25,000. 
C) $100,000. 
D) $250,000. 
A) $10,000. 
B) $25,000. 
C) $100,000. 
D) $250,000.

Question 7

The Basel framework recommends that banks maintain capital in proportion to their

Accepted Answer

A) mortgages. 
B) commercial paper. 
C) liabilities. 
D) risk-weighted assets. 
A) mortgages. 
B) commercial paper. 
C) liabilities. 
D) risk-weighted assets.

Question 8

The moral hazard problem is minimized when deposit insurance premiums are

Accepted Answer

A) zero (not imposed by the FDI
C) . 
B) the same for all banks. 
C) set at a fixed rate for large banks and at zero for small banks. 
D) based on the bank's risk. 
A) zero (not imposed by the FDI
C) . 
B) the same for all banks. 
C) set at a fixed rate for large banks and at zero for small banks. 
D) based on the bank's risk.

Question 9

Which of the following is an "off-balance-sheet commitment"?

Accepted Answer

A) long-term debt 
B) additional paid-in capital 
C) notes payable 
D) standby  letters of credit backing commercial paper issued by firms 
A) long-term debt 
B) additional paid-in capital 
C) notes payable 
D) standby  letters of credit backing commercial paper issued by firms

Question 10

All banks that are members of the Federal Reserve must hold

Accepted Answer

A) private insurance on deposits. 
B) FDIC insurance on deposits. 
C) both FDIC and private insurance on deposits. 
D) None of these are correct. 
A) private insurance on deposits. 
B) FDIC insurance on deposits. 
C) both FDIC and private insurance on deposits. 
D) None of these are correct.

Question 11

Federal deposit insurance

Accepted Answer

A) has existed since the 1800s. 
B) was created in 1933. 
C) was created after World War II. 
D) was created in 1960. 
A) has existed since the 1800s. 
B) was created in 1933. 
C) was created after World War II. 
D) was created in 1960.

Question 12

During the credit crisis, the U.S. government's Troubled Asset Relief Program (TARP)injected capital into banks by purchasing their preferred stock to provide them with a cushion against loan losses.

Accepted Answer

A) True 
 B)False

Question 13

The Reigle-Neal Interstate Banking and Branching Efficiency Act allowed banks to achieve economies of scale through nationwide interstate banking.

Accepted Answer

A) True 
 B)False

Question 14

The Sarbanes-Oxley Act (SOX)was enacted to ensure a more transparent process for reporting on a firm's productivity and financial condition.

Accepted Answer

A) True 
 B)False

Question 15

The opening of a commercial bank in the United States

Accepted Answer

A) does not require a charter. 
B) always requires a charter from a state government. 
C) always requires a charter from the federal government. ​ 
D) requires a charter from a state or the federal government. 
E) requires a charter from both the state and federal government. 
A) does not require a charter. 
B) always requires a charter from a state government. 
C) always requires a charter from the federal government. ​ 
D) requires a charter from a state or the federal government. 
E) requires a charter from both the state and federal government.

Question 16

National banks are regulated by ____, and state banks are regulated by ____.

Accepted Answer

A) the Comptroller of the Currency; their state agency 
B) the Comptroller of the Currency; the Comptroller of the Currency 
C) their state agency; their state agency 
D) their state agency; the Comptroller of the Currency 
A) the Comptroller of the Currency; their state agency 
B) the Comptroller of the Currency; the Comptroller of the Currency 
C) their state agency; their state agency 
D) their state agency; the Comptroller of the Currency

Question 17

Banks commonly use depositor funds to invest in stocks.

Accepted Answer

A) True 
 B)False

Question 18

A potential benefit of the Financial Services Modernization Act is that

Accepted Answer

A) financial institutions can reduce their reliance on the demand for a single service. 
B) financial institutions can spread across state lines as a result of the act. 
C) financial institutions are free to provide loans for highly leveraged transactions and thereby increase their earnings. 
D) financial institutions can reduce their reliance on the demand for a single service AND  financial institutions can spread across state lines as a result of the act. 
A) financial institutions can reduce their reliance on the demand for a single service. 
B) financial institutions can spread across state lines as a result of the act. 
C) financial institutions are free to provide loans for highly leveraged transactions and thereby increase their earnings. 
D) financial institutions can reduce their reliance on the demand for a single service AND  financial institutions can spread across state lines as a result of the act.

Question 19

The Depository Institutions Deregulation and Monetary Control Act of 1980 allowed banks to set their own

Accepted Answer

A) reserve requirements. 
B) capital ratios. 
C) interest rates on savings deposits. 
D) corporate loan interest rates. 
A) reserve requirements. 
B) capital ratios. 
C) interest rates on savings deposits. 
D) corporate loan interest rates.

Question 20

The potential risk that financial problems can spread through financial institutions and the financial system is referred to as ________ risk.

Accepted Answer

A) systemic 
B) systematic 
C) unsystematic 
D) market 
A) systemic 
B) systematic 
C) unsystematic 
D) market

Exam 18: Bank Regulation

State banks are regulated by the Comptroller of the Currency.

The Financial Reform Act (Wall Street Reform and Consumer Protection Act or Dodd-Frank Act)of 2010

During the credit crisis, the U.S. government purchased the common stock of the largest banks in order to inject funds into the banks and cushion their losses.

The Garn-St Germain Act of 1982

In making loans to a single customer, commercial banks ____ restricted to a maximum percentage of their capital, and they ____ allowed to use borrowed or deposited funds to purchase common stock.

Deposit insurance has a limit of

The Basel framework recommends that banks maintain capital in proportion to their

The moral hazard problem is minimized when deposit insurance premiums are

Which of the following is an "off-balance-sheet commitment"?

All banks that are members of the Federal Reserve must hold

Federal deposit insurance

During the credit crisis, the U.S. government's Troubled Asset Relief Program (TARP)injected capital into banks by purchasing their preferred stock to provide them with a cushion against loan losses.

The Reigle-Neal Interstate Banking and Branching Efficiency Act allowed banks to achieve economies of scale through nationwide interstate banking.

The Sarbanes-Oxley Act (SOX)was enacted to ensure a more transparent process for reporting on a firm's productivity and financial condition.

The opening of a commercial bank in the United States

National banks are regulated by ____, and state banks are regulated by ____.

Banks commonly use depositor funds to invest in stocks.

A potential benefit of the Financial Services Modernization Act is that

The Depository Institutions Deregulation and Monetary Control Act of 1980 allowed banks to set their own

The potential risk that financial problems can spread through financial institutions and the financial system is referred to as ________ risk.

Role of Financial Markets and Institutions

Determination of Interest Rates

Structure of Interest Rates

Functions of the Fed

Monetary Policy

Money Markets

Bond Markets

Bond Valuation and Risk

Mortgage Markets

Stock Offerings and Investor Monitoring

Stock Valuation and Risk

Market Microstructure and Strategies

Financial Futures Markets

Options Markets

Swap Markets

Foreign Exchange Derivative Markets

Commercial Bank Operations

Bank Management

Bank Performance

Thrift Operations

Finance Company Operations

Mutual Fund Operations

Securities Operations

Insurance and Pension Fund Operations

Pension Fund Operations

Filters

In making loans to a single customer, commercial banks restricted to a maximum percentage of their capital, and they allowed to use borrowed or deposited funds to purchase common stock.

National banks are regulated by , and state banks are regulated by .