Question 1

____ savings institutions hold the most assets in aggregate.

Accepted Answer

A)  Stock-owned 
B)  Mutual 
C)  Closely held 
D)  Privatized 
A)  Stock-owned 
B)  Mutual 
C)  Closely held 
D)  Privatized

Question 2

During the credit crisis of 2008-2009, savings institutions experienced all of the following except:

Accepted Answer

A)  high default rates on loans to finance leveraged buyouts. 
B)  a decline in the level of mortgage originations. 
C)  high default rates on subprime mortgages. 
D)  losses on investments in mortgage-backed securities. 
A)  high default rates on loans to finance leveraged buyouts. 
B)  a decline in the level of mortgage originations. 
C)  high default rates on subprime mortgages. 
D)  losses on investments in mortgage-backed securities.

Question 3

Under the Financial Reform Act (Dodd-Frank Act) of 2010, all federally chartered savings institutions are to be regulated by the Federal Reserve, so these savings institutions no longer haveanincentive to go regulator shopping.

Accepted Answer

A) True 
 B)False

Question 4

____ risk is probably the least concern for savings institutions.

Accepted Answer

A)  Liquidity 
B)  Exchange rate 
C)  Credit 
D)  Interest rate 
A)  Liquidity 
B)  Exchange rate 
C)  Credit 
D)  Interest rate

Question 5

The majority of maturities on consumer loans offered by credit unions are ____ term, causing income generated on their asset portfolio to be ____ to interest rate movements.

Accepted Answer

A)  long; insensitive 
B)  short or medium; sensitive 
C)  long; sensitive 
D)  short or medium; insensitive 
A)  long; insensitive 
B)  short or medium; sensitive 
C)  long; sensitive 
D)  short or medium; insensitive

Question 6

Credit unions obtain most of their funds from

Accepted Answer

A)  issuing common stock. 
B)  retained earnings. 
C)  share deposits by members. 
D)  issuing long-term bonds. 
A)  issuing common stock. 
B)  retained earnings. 
C)  share deposits by members. 
D)  issuing long-term bonds.

Question 7

Money market deposit accounts (MMDAs) are

Accepted Answer

A)  trust accounts managed by savings institutions. 
B)  checking accounts that do not pay interest. 
C)  accounts offered primarily by money market funds. 
D)  deposit accounts offering limited checking and close-to-market interest rates. 
A)  trust accounts managed by savings institutions. 
B)  checking accounts that do not pay interest. 
C)  accounts offered primarily by money market funds. 
D)  deposit accounts offering limited checking and close-to-market interest rates.

Question 8

The risk that a credit union will experience an unanticipated wave of withdrawals without an offsetting amount of new deposits is ____ risk.

Accepted Answer

A)  credit (default) 
B)  interest rate 
C)  liquidity 
D)  exchange rate 
E)  none of the above 
A)  credit (default) 
B)  interest rate 
C)  liquidity 
D)  exchange rate 
E)  none of the above

Question 9

Today, savings institutions are not permitted to invest in junk bonds.

Accepted Answer

A) True 
 B)False

Question 10

Credit unions use the majority of their funds to invest in the stock market.

Accepted Answer

A) True 
 B)False

Question 11

Deposits at credit unions are called

Accepted Answer

A)  NOW accounts. 
B)  money market deposit accounts. 
C)  shares. 
D)  credit union deposit accounts. 
A)  NOW accounts. 
B)  money market deposit accounts. 
C)  shares. 
D)  credit union deposit accounts.

Question 12

Interest-paying checkable accounts offered by credit unions are called

Accepted Answer

A)  NOW accounts. 
B)  money market deposit accounts. 
C)  share certificates. 
D)  share drafts. 
A)  NOW accounts. 
B)  money market deposit accounts. 
C)  share certificates. 
D)  share drafts.

Question 13

Which of the following was not a major reason for the savings institution crisis in the late 1980s?

Accepted Answer

A)  large losses on real estate loans 
B)  large losses on loans to less-developed countries 
C)  fraud 
D)  illiquidity 
E)  increased interest expenses 
A)  large losses on real estate loans 
B)  large losses on loans to less-developed countries 
C)  fraud 
D)  illiquidity 
E)  increased interest expenses

Question 14

A contract that allows for the purchase of a specified debt security for a specified price at a future point in time is known as a(n)

Accepted Answer

A)  interest rate futures contract. 
B)  interest rate swap contract. 
C)  interest cap contract. 
D)  security swap contract. 
A)  interest rate futures contract. 
B)  interest rate swap contract. 
C)  interest cap contract. 
D)  security swap contract.

Question 15

Savings institutions commonly measure the gap between their rate-sensitive assets and rate-sensitive liabilities in order to determine their exposure to credit risk.

Accepted Answer

A) True 
 B)False

Question 16

The Financial Reform Act of 2010 did all of the following except:

Accepted Answer

A)  strengthened the standards required to obtain a mortgage. 
B)  required more disclosures by financial institutions regarding the quality of the underlying assets when they sell mortgage-backed securities. 
C)  required savings institutions to sell off any holdings of junk bonds and prohibited them from investing in junk bonds in the future. 
D)  established the Consumer Financial Protection Bureau. 
A)  strengthened the standards required to obtain a mortgage. 
B)  required more disclosures by financial institutions regarding the quality of the underlying assets when they sell mortgage-backed securities. 
C)  required savings institutions to sell off any holdings of junk bonds and prohibited them from investing in junk bonds in the future. 
D)  established the Consumer Financial Protection Bureau.

Question 17

A savings institution owned by its depositors is a ____ savings institution.

Accepted Answer

A)  mutual 
B)  stock 
C)  credit 
D)  closed-end 
A)  mutual 
B)  stock 
C)  credit 
D)  closed-end

Question 18

____ is (are) not a main use of funds for savings institutions.

Accepted Answer

A)  Capital 
B)  Mortgages 
C)  Consumer and commercial loans 
D)  Mortgage-backed securities 
A)  Capital 
B)  Mortgages 
C)  Consumer and commercial loans 
D)  Mortgage-backed securities

Question 19

If credit union members have a particular affiliation with their employers and large layoffs occur, the credit union's exposure to ____ risk may increase.

Accepted Answer

A)  settlement 
B)  interest rate 
C)  credit 
D)  none of the above 
A)  settlement 
B)  interest rate 
C)  credit 
D)  none of the above

Question 20

____ is (are) not a main source of funds for savings institutions.

Accepted Answer

A)  Deposits 
B)  Borrowed funds 
C)  Capital 
D)  Mortgages 
A)  Deposits 
B)  Borrowed funds 
C)  Capital 
D)  Mortgages

Exam 21: Thrift Operations

____ savings institutions hold the most assets in aggregate.

During the credit crisis of 2008-2009, savings institutions experienced all of the following except:

Under the Financial Reform Act (Dodd-Frank Act) of 2010, all federally chartered savings institutions are to be regulated by the Federal Reserve, so these savings institutions no longer haveanincentive to go regulator shopping.

____ risk is probably the least concern for savings institutions.

The majority of maturities on consumer loans offered by credit unions are ____ term, causing income generated on their asset portfolio to be ____ to interest rate movements.

Credit unions obtain most of their funds from

Money market deposit accounts (MMDAs) are

The risk that a credit union will experience an unanticipated wave of withdrawals without an offsetting amount of new deposits is ____ risk.

Today, savings institutions are not permitted to invest in junk bonds.

Credit unions use the majority of their funds to invest in the stock market.

Deposits at credit unions are called

Interest-paying checkable accounts offered by credit unions are called

Which of the following was not a major reason for the savings institution crisis in the late 1980s?

A contract that allows for the purchase of a specified debt security for a specified price at a future point in time is known as a(n)

Savings institutions commonly measure the gap between their rate-sensitive assets and rate-sensitive liabilities in order to determine their exposure to credit risk.

The Financial Reform Act of 2010 did all of the following except:

A savings institution owned by its depositors is a ____ savings institution.

____ is (are) not a main use of funds for savings institutions.

If credit union members have a particular affiliation with their employers and large layoffs occur, the credit union's exposure to ____ risk may increase.

____ is (are) not a main source of funds for savings institutions.

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 Regulation

Bank Management

Bank Performance

Finance Company Operations

Mutual Fund Operations

Securities Operations

Insurance Operations

Pension Fund Operations

Filters

The majority of maturities on consumer loans offered by credit unions are term, causing income generated on their asset portfolio to be to interest rate movements.