Question 1

Reasons that banks become insolvent include all of the following EXCEPT:

Accepted Answer

A) excessive credit risk 
B) interest rate risk 
C) insufficient collateral 
D) all of the above are correct 
A) excessive credit risk 
B) interest rate risk 
C) insufficient collateral 
D) all of the above are correct

Question 2

The primary types of assets on a bank's balance sheet include cash,securities,and loans.

Accepted Answer

A) True 
 B)False

Question 3

The likelihood that borrowers are ill and would not be able to make interest and principal payments is an example of:

Accepted Answer

A) interest rate risk 
B) credit risk 
C) liquidity risk 
D) capital adequacy risk 
A) interest rate risk 
B) credit risk 
C) liquidity risk 
D) capital adequacy risk

Question 4

Capital notes:

Accepted Answer

A) are the prime assets of commercial banks 
B) reflect long-term of a bank for purposes of bolstering the equity of the bank 
C) current investments of a bank 
D) none of the above 
A) are the prime assets of commercial banks 
B) reflect long-term of a bank for purposes of bolstering the equity of the bank 
C) current investments of a bank 
D) none of the above

Question 5

Financial institutions include:

Accepted Answer

A) banks 
B) pension funds 
C) insurance companies 
D) all of the above 
A) banks 
B) pension funds 
C) insurance companies 
D) all of the above

Question 6

The total capital ratio (TCR)can be computed as total capital divided by total assets times 100.

Accepted Answer

A) True 
 B)False

Question 7

The Depository Institutions Deregulation and Monetary Control Act of 1980 did not:

Accepted Answer

A) eliminate all Regulation Q requirements 
B) allow all depository institutions to borrow from the Fed on the same basis 
C) increase federal deposit insurance 
D) amend the Home Owner's Loan Act of 1993 
A) eliminate all Regulation Q requirements 
B) allow all depository institutions to borrow from the Fed on the same basis 
C) increase federal deposit insurance 
D) amend the Home Owner's Loan Act of 1993

Question 8

Primary reserves

Accepted Answer

A) include the cash assets of the firm under the heading "cash and balances due from depository institutions. 
B) are short term securities held by banks that are quickly converted into cash at little cost to the banks. 
C) reflects the bank's ability to meet depositor withdrawals. 
D) reflects the bank's ability to keep the value of a bank's assets greater than its liabilities. 
A) include the cash assets of the firm under the heading "cash and balances due from depository institutions. 
B) are short term securities held by banks that are quickly converted into cash at little cost to the banks. 
C) reflects the bank's ability to meet depositor withdrawals. 
D) reflects the bank's ability to keep the value of a bank's assets greater than its liabilities.

Question 9

The prime rate of interest has been relatively stable during the past twenty-five years.

Accepted Answer

A) True 
 B)False

Question 10

The principal assets of banks do not include:

Accepted Answer

A) cash 
B) loans 
C) time deposits 
D) securities owned 
A) cash 
B) loans 
C) time deposits 
D) securities owned

Question 11

Primary capital consists of owners' capital,preferred stock,debt convertible into common stock,and loan loss reserves.

Accepted Answer

A) True 
 B)False

Question 12

Interest rate risk results from possible price fluctuations in fixed-rate debt instruments associated with changes in market interest rates.

Accepted Answer

A) True 
 B)False

Question 13

The Monetary Control Act prohibited the Federal Reserve from controlling thrift institutions.

Accepted Answer

A) True 
 B)False

Question 14

Credit risk is the likelihood that a bank will be unable to meet depositor withdrawal demands and other liabilities when due.

Accepted Answer

A) True 
 B)False

Question 15

_______________ provide loans directly to consumers and businesses or aid individuals in obtaining financing of durable goods and homes,whereas ______________ originate mortgage loans on homes and other real property by bringing together borrowers and institutional investors.

Accepted Answer

A) thrift institutions,savings and loans 
B) thrift institutions,mortgage banking firms 
C) finance companies,savings and loans 
D) finance companies,mortgage banking firms 
E) none of the above 
A) thrift institutions,savings and loans 
B) thrift institutions,mortgage banking firms 
C) finance companies,savings and loans 
D) finance companies,mortgage banking firms 
E) none of the above

Question 16

The Resolution Trust Corporation was brought into existence to:

Accepted Answer

A) help savings and loan institutions invest funds in a wide range of higher yielding instruments 
B) authorize savings and loan institutions to issue a new money market account?with no regulated interest rate ceiling 
C) take over and liquidate the assets of failed savings and loan institutions 
D) all the above 
A) help savings and loan institutions invest funds in a wide range of higher yielding instruments 
B) authorize savings and loan institutions to issue a new money market account?with no regulated interest rate ceiling 
C) take over and liquidate the assets of failed savings and loan institutions 
D) all the above

Question 17

Credit risk is the chance of nonpayment or delayed payment of interest or principal.

Accepted Answer

A) True 
 B)False

Question 18

Nonbank financial conglomerates are large corporations that offer various financial services,such as mortgage insurance,real estate management,and consumer finance.

Accepted Answer

A) True 
 B)False

Question 19

Savings and loan associations are cooperative nonprofit organizations that exist primarily to provide member depositors with consumer credit.

Accepted Answer

A) True 
 B)False

Question 20

__________________ accept and invest individual savings and also facilitate the sale and transfer of securities between investors.

Accepted Answer

A) Securities firms 
B) Pension funds 
C) Asset management companies 
D) none of the above 
A) Securities firms 
B) Pension funds 
C) Asset management companies 
D) none of the above

Reasons that banks become insolvent include all of the following EXCEPT:

The primary types of assets on a bank's balance sheet include cash,securities,and loans.

The likelihood that borrowers are ill and would not be able to make interest and principal payments is an example of:

Capital notes:

Financial institutions include:

The total capital ratio (TCR)can be computed as total capital divided by total assets times 100.

The Depository Institutions Deregulation and Monetary Control Act of 1980 did not:

Primary reserves

The prime rate of interest has been relatively stable during the past twenty-five years.

The principal assets of banks do not include:

Primary capital consists of owners' capital,preferred stock,debt convertible into common stock,and loan loss reserves.

Interest rate risk results from possible price fluctuations in fixed-rate debt instruments associated with changes in market interest rates.

The Monetary Control Act prohibited the Federal Reserve from controlling thrift institutions.

Credit risk is the likelihood that a bank will be unable to meet depositor withdrawal demands and other liabilities when due.

_ provide loans directly to consumers and businesses or aid individuals in obtaining financing of durable goods and homes,whereas originate mortgage loans on homes and other real property by bringing together borrowers and institutional investors.

The Resolution Trust Corporation was brought into existence to:

Credit risk is the chance of nonpayment or delayed payment of interest or principal.

Nonbank financial conglomerates are large corporations that offer various financial services,such as mortgage insurance,real estate management,and consumer finance.

Savings and loan associations are cooperative nonprofit organizations that exist primarily to provide member depositors with consumer credit.

__________________ accept and invest individual savings and also facilitate the sale and transfer of securities between investors.

The Financial Environment

Money and the Monetary System

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 3: Banks and Other Financial Institutions

Reasons that banks become insolvent include all of the following EXCEPT:

The primary types of assets on a bank's balance sheet include cash,securities,and loans.

The likelihood that borrowers are ill and would not be able to make interest and principal payments is an example of:

Capital notes:

Financial institutions include:

The total capital ratio (TCR)can be computed as total capital divided by total assets times 100.

The Depository Institutions Deregulation and Monetary Control Act of 1980 did not:

Primary reserves

The prime rate of interest has been relatively stable during the past twenty-five years.

The principal assets of banks do not include:

Primary capital consists of owners' capital,preferred stock,debt convertible into common stock,and loan loss reserves.

Interest rate risk results from possible price fluctuations in fixed-rate debt instruments associated with changes in market interest rates.

The Monetary Control Act prohibited the Federal Reserve from controlling thrift institutions.

Credit risk is the likelihood that a bank will be unable to meet depositor withdrawal demands and other liabilities when due.

_______________ provide loans directly to consumers and businesses or aid individuals in obtaining financing of durable goods and homes,whereas ______________ originate mortgage loans on homes and other real property by bringing together borrowers and institutional investors.

The Resolution Trust Corporation was brought into existence to:

Credit risk is the chance of nonpayment or delayed payment of interest or principal.

Nonbank financial conglomerates are large corporations that offer various financial services,such as mortgage insurance,real estate management,and consumer finance.

Savings and loan associations are cooperative nonprofit organizations that exist primarily to provide member depositors with consumer credit.

__________________ accept and invest individual savings and also facilitate the sale and transfer of securities between investors.

The Financial Environment

Money and the Monetary System

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

_ provide loans directly to consumers and businesses or aid individuals in obtaining financing of durable goods and homes,whereas originate mortgage loans on homes and other real property by bringing together borrowers and institutional investors.