Question 1

Target banks involved in mergers seldom experience stock price increases of over 10 percent.

Accepted Answer

A) True 
 B)False

Question 2

According to Modigliani and Cohn, high inflation tends to cause equities to be:

Accepted Answer

A)  overvalued 
B)  undervalued 
C)  appropriately valued 
A)  overvalued 
B)  undervalued 
C)  appropriately valued

Question 3

A dollar increase in operating earnings appears to have the same impact on stock price as a dollar increase in capital gains.

Accepted Answer

A) True 
 B)False

Question 4

The price-earnings ratio is the conventional way to express the sales price of a target bank in a merger or acquisition deal.

Accepted Answer

A) True 
 B)False

Question 5

Price-earnings ratios of large U.S. banks during the economic recession in 2002:

Accepted Answer

A)  increased 
B)  decreased 
C)  did not change for the most part 
A)  increased 
B)  decreased 
C)  did not change for the most part

Question 6

The price-earnings ratio summarizes the outlook for the future of the bank.

Accepted Answer

A) True 
 B)False

Question 7

The value of a share of stock is determined fundamentally by the cash benefits that the buyer expects to receive from the asset.

Accepted Answer

A) True 
 B)False

Question 8

The price earnings ratio may be obtained by dividing the total market value of the stock of the bank by the total dollar value of its earnings.

Accepted Answer

A) True 
 B)False

Question 9

Barth, Beaver, and Wolfson, in their study of the influence of operating earnings and securities gains and losses, found that:

Accepted Answer

A)  banks with higher operating earnings had higher stock prices 
B)  banks with higher securities gains had higher stock prices 
C)  banks with securities gains had lower stock prices 
D)  a and c 
A)  banks with higher operating earnings had higher stock prices 
B)  banks with higher securities gains had higher stock prices 
C)  banks with securities gains had lower stock prices 
D)  a and c

Question 10

Cornett and Tehranian examined the post-acquisition performances of large bank mergers and found:

Accepted Answer

A)  the merged banks showed evidence of superior cash flow performance 
B)  the merged banks improved their ability to attract loans and deposits 
C)  employee productivity declined at the merged banks 
D)  a and b 
A)  the merged banks showed evidence of superior cash flow performance 
B)  the merged banks improved their ability to attract loans and deposits 
C)  employee productivity declined at the merged banks 
D)  a and b

Question 11

The rate of return on a stock is the sum of the dividend yield and the price change.

Accepted Answer

A) True 
 B)False

Question 12

Deregulation appears to have changed the determinants of bank stock prices.

Accepted Answer

A) True 
 B)False

Question 13

Synergy as a motive in bank mergers and acquisitions is related to:

Accepted Answer

A)  management expertise 
B)  agency costs 
C)  cost efficiency 
D)  a and c 
E)  a, b, and c 
A)  management expertise 
B)  agency costs 
C)  cost efficiency 
D)  a and c 
E)  a, b, and c

Question 14

According to a study by Milbourn, Boot, and Thakor, a theoretical explanation for megamergers in the banking industry is to:

Accepted Answer

A)  increase synergy 
B)  increase diversification 
C)  increase market power 
D)  decrease competitive uncertainty 
A)  increase synergy 
B)  increase diversification 
C)  increase market power 
D)  decrease competitive uncertainty

Question 15

Fraser and Kolari found that the Return of Assets was substantially higher for high premium merging small banks.

Accepted Answer

A) True 
 B)False

Question 16

What usually happens to the price of the buyer's (bidder's) stock in a bank merger?

Accepted Answer

A)  it goes up slightly 
B)  it declines 
C)  remains unchanged 
D)  there is no predictable pattern 
A)  it goes up slightly 
B)  it declines 
C)  remains unchanged 
D)  there is no predictable pattern

Question 17

If the market price of a bank's stock is $20, it pays no cash dividend, it pays a 5% stock dividend, and its earnings are negative, what is its price-earnings ratio?

Accepted Answer

A)  4 
B)  Infinite 
C)  Not meaningful 
D)  5 
A)  4 
B)  Infinite 
C)  Not meaningful 
D)  5

Question 18

In Fraser and Kolari's study of the price-book ratio for smaller banks involved in mergers, the author's find:

Accepted Answer

A)  high profit banks commanded higher merger premiums 
B)  high premium banks had a higher fraction of their assets financed with demand deposits 
C)  high premium small banks were located in markets experiencing greater population growth 
D)  all of the above 
A)  high profit banks commanded higher merger premiums 
B)  high premium banks had a higher fraction of their assets financed with demand deposits 
C)  high premium small banks were located in markets experiencing greater population growth 
D)  all of the above

Question 19

Visser and Wu in their study of the determinants of bank price-earnings ratios before and after deregulation found:

Accepted Answer

A)  before DIDMCA, the growth rate of deposits, the growth rate of earnings, and the ratio of capital to assets were positively associated with the price-earnings ratio 
B)  after DIDMCA, the divided payout ratio became more significant while the past earnings growth rate remained highly important 
C)  after DIDMCA, growth became less important 
D)  all of the above. 
A)  before DIDMCA, the growth rate of deposits, the growth rate of earnings, and the ratio of capital to assets were positively associated with the price-earnings ratio 
B)  after DIDMCA, the divided payout ratio became more significant while the past earnings growth rate remained highly important 
C)  after DIDMCA, growth became less important 
D)  all of the above.

Question 20

Hughs, Lang, Mester, and Moon found that banks involved in mergers and acquisitions across state lines benefited in terms of:

Accepted Answer

A)  diversification benefits 
B)  greater revenues 
C)  lower operating risk 
D)  a and c 
E)  a, b, and c 
A)  diversification benefits 
B)  greater revenues 
C)  lower operating risk 
D)  a and c 
E)  a, b, and c

Target banks involved in mergers seldom experience stock price increases of over 10 percent.

According to Modigliani and Cohn, high inflation tends to cause equities to be:

A dollar increase in operating earnings appears to have the same impact on stock price as a dollar increase in capital gains.

The price-earnings ratio is the conventional way to express the sales price of a target bank in a merger or acquisition deal.

Price-earnings ratios of large U.S. banks during the economic recession in 2002:

The price-earnings ratio summarizes the outlook for the future of the bank.

The value of a share of stock is determined fundamentally by the cash benefits that the buyer expects to receive from the asset.

The price earnings ratio may be obtained by dividing the total market value of the stock of the bank by the total dollar value of its earnings.

Barth, Beaver, and Wolfson, in their study of the influence of operating earnings and securities gains and losses, found that:

Cornett and Tehranian examined the post-acquisition performances of large bank mergers and found:

The rate of return on a stock is the sum of the dividend yield and the price change.

Deregulation appears to have changed the determinants of bank stock prices.

Synergy as a motive in bank mergers and acquisitions is related to:

According to a study by Milbourn, Boot, and Thakor, a theoretical explanation for megamergers in the banking industry is to:

Fraser and Kolari found that the Return of Assets was substantially higher for high premium merging small banks.

What usually happens to the price of the buyer's (bidder's) stock in a bank merger?

If the market price of a bank's stock is $20, it pays no cash dividend, it pays a 5% stock dividend, and its earnings are negative, what is its price-earnings ratio?

In Fraser and Kolari's study of the price-book ratio for smaller banks involved in mergers, the author's find:

Visser and Wu in their study of the determinants of bank price-earnings ratios before and after deregulation found:

Hughs, Lang, Mester, and Moon found that banks involved in mergers and acquisitions across state lines benefited in terms of:

Functions and Forms of Banking

The Bank Regulatory Environment

Evaluating Bank Performance

An Overview of Assetliability Management Alm

Techniques of Assetliability Management: Futures, Options, and Swaps

Investment Management

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 4: Bank Valuation

Target banks involved in mergers seldom experience stock price increases of over 10 percent.

According to Modigliani and Cohn, high inflation tends to cause equities to be:

A dollar increase in operating earnings appears to have the same impact on stock price as a dollar increase in capital gains.

The price-earnings ratio is the conventional way to express the sales price of a target bank in a merger or acquisition deal.

Price-earnings ratios of large U.S. banks during the economic recession in 2002:

The price-earnings ratio summarizes the outlook for the future of the bank.

The value of a share of stock is determined fundamentally by the cash benefits that the buyer expects to receive from the asset.

The price earnings ratio may be obtained by dividing the total market value of the stock of the bank by the total dollar value of its earnings.

Barth, Beaver, and Wolfson, in their study of the influence of operating earnings and securities gains and losses, found that:

Cornett and Tehranian examined the post-acquisition performances of large bank mergers and found:

The rate of return on a stock is the sum of the dividend yield and the price change.

Deregulation appears to have changed the determinants of bank stock prices.

Synergy as a motive in bank mergers and acquisitions is related to:

According to a study by Milbourn, Boot, and Thakor, a theoretical explanation for megamergers in the banking industry is to:

Fraser and Kolari found that the Return of Assets was substantially higher for high premium merging small banks.

What usually happens to the price of the buyer's (bidder's) stock in a bank merger?

If the market price of a bank's stock is $20, it pays no cash dividend, it pays a 5% stock dividend, and its earnings are negative, what is its price-earnings ratio?

In Fraser and Kolari's study of the price-book ratio for smaller banks involved in mergers, the author's find:

Visser and Wu in their study of the determinants of bank price-earnings ratios before and after deregulation found:

Hughs, Lang, Mester, and Moon found that banks involved in mergers and acquisitions across state lines benefited in terms of:

Functions and Forms of Banking

The Bank Regulatory Environment

Evaluating Bank Performance

An Overview of Assetliability Management Alm

Techniques of Assetliability Management: Futures, Options, and Swaps

Investment Management

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