Question 1

Which of the following comprises the largest proportion of investment in securities portfolios of commercial banks?

Accepted Answer

A)  municipal securities 
B)  U.S. Treasury and agency securities 
C)  corporate securities 
D)  mortgage backed securities 
A)  municipal securities 
B)  U.S. Treasury and agency securities 
C)  corporate securities 
D)  mortgage backed securities

Question 2

Which of the following is NOT a federal agency that issues securities representing claims on mortgage pools?

Accepted Answer

A)  VA 
B)  MRA 
C)  FNMA 
D)  GNMA 
A)  VA 
B)  MRA 
C)  FNMA 
D)  GNMA

Question 3

Aggressive strategies for managing investment portfolios include:

Accepted Answer

A)  bond swapping 
B)  playing the yield curve 
C)  split-maturity approach 
D)  a and b 
E)  a, b, and c 
A)  bond swapping 
B)  playing the yield curve 
C)  split-maturity approach 
D)  a and b 
E)  a, b, and c

Question 4

A tax swap entails selling bonds with tax losses and buying bonds with tax gains.

Accepted Answer

A) True 
 B)False

Question 5

The Glass Steagall Act prohibited banks from holding:

Accepted Answer

A)  corporate bonds 
B)  corporate stocks 
C)  municipal securities 
D)  agency securities 
E)  none of the above 
A)  corporate bonds 
B)  corporate stocks 
C)  municipal securities 
D)  agency securities 
E)  none of the above

Question 6

Moody's/S&P's regularly reports information on distressed sale values of assets of firms in the event those firms' debt issues go into default.

Accepted Answer

A) True 
 B)False

Question 7

Securities that are "assets held for maturity" in a bank are valued on their balance sheet at:

Accepted Answer

A)  book value 
B)  market value 
C)  regulatory value 
D)  none of the above 
A)  book value 
B)  market value 
C)  regulatory value 
D)  none of the above

Question 8

Bond ratings do NOT capture:

Accepted Answer

A)  default risk 
B)  probability of missed interest payments 
C)  probability of missed principal payments 
D)  potential losses to bondholders 
A)  default risk 
B)  probability of missed interest payments 
C)  probability of missed principal payments 
D)  potential losses to bondholders

Question 9

Which of the following securities would tend to offer the highest yield?

Accepted Answer

A)  Treasury bills 
B)  Treasury notes 
C)  agency securities 
D)  general obligation municipal bonds 
E)  revenue bonds 
A)  Treasury bills 
B)  Treasury notes 
C)  agency securities 
D)  general obligation municipal bonds 
E)  revenue bonds

Question 10

Banks and individuals are exposed to the same tax treatment for municipal securities holdings under the Tax Reform Act of 1986.

Accepted Answer

A) True 
 B)False

Question 11

During recessionary periods, the yield spread between low and high quality bonds tends to increase.

Accepted Answer

A) True 
 B)False

Question 12

If a bank has a positive duration gap, an increase in interest rates will tend to cause the equity value of the bank to increase.

Accepted Answer

A) True 
 B)False

Question 13

Default risk on bonds can be evaluated by using:

Accepted Answer

A)  financial analysis 
B)  bond ratings 
C)  estimates of potential losses on bonds 
D)  a and b 
A)  financial analysis 
B)  bond ratings 
C)  estimates of potential losses on bonds 
D)  a and b

Question 14

Treasury notes and bonds:

Accepted Answer

A)  are sold only at a discount 
B)  are coupon-bearing instruments 
C)  range in maturities from 1 to 5 years 
D)  b and c 
E)  a, b, and c 
A)  are sold only at a discount 
B)  are coupon-bearing instruments 
C)  range in maturities from 1 to 5 years 
D)  b and c 
E)  a, b, and c

Question 15

When interest rates are low, differences in deposit and loan demands tend to cause a positive duration gap.

Accepted Answer

A) True 
 B)False

Question 16

The long-term bond market is dominated by:

Accepted Answer

A)  life insurance companies and pension funds 
B)  pension funds and commercial banks 
C)  commercial banks and the Fed 
D)  life insurance companies and the Fed 
A)  life insurance companies and pension funds 
B)  pension funds and commercial banks 
C)  commercial banks and the Fed 
D)  life insurance companies and the Fed

Question 17

According to the expectations theory of the yield curve, if the 2-year spot rate is 8% and the 1-year spot rate is 9%, the 1-year rate from now will be:

Accepted Answer

A)  10% 
B)  9% 
C)  8% 
D)  7% 
E)  none of the above 
A)  10% 
B)  9% 
C)  8% 
D)  7% 
E)  none of the above

Question 18

The expectations theory of the yield curve says that the rate of return that investors earn can differ depending on the maturities of securities that investors hold.

Accepted Answer

A) True 
 B)False

Question 19

Higher activity ratios reflect stronger short-term solvency.

Accepted Answer

A) True 
 B)False

Question 20

The choice of aggressive or passive investment portfolio management strategies is related to all of the following EXCEPT:

Accepted Answer

A)  need to conserve management resources 
B)  ability to implement the strategy 
C)  size of the bank 
D)  none of the above; they all influence portfolio management strategies 
A)  need to conserve management resources 
B)  ability to implement the strategy 
C)  size of the bank 
D)  none of the above; they all influence portfolio management strategies

Which of the following comprises the largest proportion of investment in securities portfolios of commercial banks?

Which of the following is NOT a federal agency that issues securities representing claims on mortgage pools?

Aggressive strategies for managing investment portfolios include:

A tax swap entails selling bonds with tax losses and buying bonds with tax gains.

The Glass Steagall Act prohibited banks from holding:

Moody's/S&P's regularly reports information on distressed sale values of assets of firms in the event those firms' debt issues go into default.

Securities that are "assets held for maturity" in a bank are valued on their balance sheet at:

Bond ratings do NOT capture:

Which of the following securities would tend to offer the highest yield?

Banks and individuals are exposed to the same tax treatment for municipal securities holdings under the Tax Reform Act of 1986.

During recessionary periods, the yield spread between low and high quality bonds tends to increase.

If a bank has a positive duration gap, an increase in interest rates will tend to cause the equity value of the bank to increase.

Default risk on bonds can be evaluated by using:

Treasury notes and bonds:

When interest rates are low, differences in deposit and loan demands tend to cause a positive duration gap.

The long-term bond market is dominated by:

According to the expectations theory of the yield curve, if the 2-year spot rate is 8% and the 1-year spot rate is 9%, the 1-year rate from now will be:

The expectations theory of the yield curve says that the rate of return that investors earn can differ depending on the maturities of securities that investors hold.

Higher activity ratios reflect stronger short-term solvency.

The choice of aggressive or passive investment portfolio management strategies is related to all of the following EXCEPT:

Functions and Forms of Banking

The Bank Regulatory Environment

Evaluating Bank Performance

Bank Valuation

An Overview of Assetliability Management Alm

Techniques of Assetliability Management: Futures, Options, and Swaps

Credit Evaluation Process

Commercial and Industrial Lending

Real Estate and Consumer Lending

Liquidity Management

Capital Management

Managing Liabilities

Off-Balance Sheet Activities

Securities, Investment Insurance Products

Other Financial Services

Electronic Banking

Global Financial Services

Filters

Exam 7: Investment Management

Which of the following comprises the largest proportion of investment in securities portfolios of commercial banks?

Which of the following is NOT a federal agency that issues securities representing claims on mortgage pools?

Aggressive strategies for managing investment portfolios include:

A tax swap entails selling bonds with tax losses and buying bonds with tax gains.

The Glass Steagall Act prohibited banks from holding:

Moody's/S&P's regularly reports information on distressed sale values of assets of firms in the event those firms' debt issues go into default.

Securities that are "assets held for maturity" in a bank are valued on their balance sheet at:

Bond ratings do NOT capture:

Which of the following securities would tend to offer the highest yield?

Banks and individuals are exposed to the same tax treatment for municipal securities holdings under the Tax Reform Act of 1986.

During recessionary periods, the yield spread between low and high quality bonds tends to increase.

If a bank has a positive duration gap, an increase in interest rates will tend to cause the equity value of the bank to increase.

Default risk on bonds can be evaluated by using:

Treasury notes and bonds:

When interest rates are low, differences in deposit and loan demands tend to cause a positive duration gap.

The long-term bond market is dominated by:

According to the expectations theory of the yield curve, if the 2-year spot rate is 8% and the 1-year spot rate is 9%, the 1-year rate from now will be:

The expectations theory of the yield curve says that the rate of return that investors earn can differ depending on the maturities of securities that investors hold.

Higher activity ratios reflect stronger short-term solvency.

The choice of aggressive or passive investment portfolio management strategies is related to all of the following EXCEPT:

Functions and Forms of Banking

The Bank Regulatory Environment

Evaluating Bank Performance

Bank Valuation

An Overview of Assetliability Management Alm

Techniques of Assetliability Management: Futures, Options, and Swaps

Credit Evaluation Process

Commercial and Industrial Lending

Real Estate and Consumer Lending

Liquidity Management

Capital Management

Managing Liabilities

Off-Balance Sheet Activities

Securities, Investment Insurance Products

Other Financial Services

Electronic Banking

Global Financial Services

Filters