Question 1

A savings institution's cash flows are ____ related to interest rate movements.

Accepted Answer

A)  positively related to 
B)  inversely related to 
C)  unrelated to 
D)  none of the above 
A)  positively related to 
B)  inversely related to 
C)  unrelated to 
D)  none of the above

Question 2

Because credit unions ____ stock, they are technically owned by the ____.

Accepted Answer

A)  issue; depositors 
B)  do not issue; depositors 
C)  issue; stockholders 
D)  do not issue; management 
A)  issue; depositors 
B)  do not issue; depositors 
C)  issue; stockholders 
D)  do not issue; management

Question 3

If a savings institution's assets have a considerably longer duration than its liabilities, it can reduce its exposure to interest rate risk by

Accepted Answer

A)  reducing its proportion of assets in the short duration categories. 
B)  increasing its proportion of liabilities in the short duration categories. 
C)  increasing its proportion of liabilities in the long duration category. 
D)  A and B 
A)  reducing its proportion of assets in the short duration categories. 
B)  increasing its proportion of liabilities in the short duration categories. 
C)  increasing its proportion of liabilities in the long duration category. 
D)  A and B

Question 4

Because savings institutions commonly use long-term liabilities to finance short-term assets, they depend on additional deposits to accommodate withdrawal requests.

Accepted Answer

A) True 
 B)False

Question 5

Credit unions use the majority of their funds to

Accepted Answer

A)  purchase investment securities. 
B)  provide commercial real estate loans. 
C)  provide small business loans to members. 
D)  provide consumer loans to members. 
A)  purchase investment securities. 
B)  provide commercial real estate loans. 
C)  provide small business loans to members. 
D)  provide consumer loans to members.

Question 6

Because credit unions are for-profit organizations, their income is taxable.

Accepted Answer

A) True 
 B)False

Question 7

Stock-owned savings institutions ____ susceptible to unfriendly takeovers. Mutual savings institutions ____ susceptible to unfriendly takeovers.

Accepted Answer

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

Question 8

Which of the following is not an objective of a credit union?

Accepted Answer

A)  to satisfy credit union members 
B)  to act as an intermediary for members by repackaging deposits 
C)  to provide loans to members who are in need of funds 
D)  All of the above are objectives of credit unions. 
A)  to satisfy credit union members 
B)  to act as an intermediary for members by repackaging deposits 
C)  to provide loans to members who are in need of funds 
D)  All of the above are objectives of credit unions.

Question 9

In general, when interest rates fall, a savings institution's cost of obtaining funds declines more than the decline in the interest earned on its loans and investments.

Accepted Answer

A) True 
 B)False

Question 10

The capital of savings institutions is primarily composed of retained earnings and funds obtained from issuing stock.

Accepted Answer

A) True 
 B)False

Question 11

The primary use of credit union funds is

Accepted Answer

A)  loans to credit union members. 
B)  the purchase of government securities. 
C)  the purchase of agency securities. 
D)  the purchase of corporate bonds. 
E)  none of the above 
A)  loans to credit union members. 
B)  the purchase of government securities. 
C)  the purchase of agency securities. 
D)  the purchase of corporate bonds. 
E)  none of the above

Question 12

Credit unions are unregulated as to the types of services they offer.

Accepted Answer

A) True 
 B)False

Question 13

The National Credit Union Administration (NCUA) is responsible for regulating savings institutions.

Accepted Answer

A) True 
 B)False

Question 14

High economic growth results in more risk for a savings institution, since its consumer loans, mortgage loans, and investments in debt securities are more likely to default.

Accepted Answer

A) True 
 B)False

Question 15

Most mortgages originated by savings institutions are for

Accepted Answer

A)  commercial buildings. 
B)  land for commercial purposes. 
C)  single-family homes or multifamily dwellings. 
D)  none of the above. 
A)  commercial buildings. 
B)  land for commercial purposes. 
C)  single-family homes or multifamily dwellings. 
D)  none of the above.

Question 16

To obtain short-term funds, savings institutions commonly borrow funds in the ____ market.

Accepted Answer

A)  stock 
B)  bond 
C)  mortgage 
D)  federal funds 
E)  futures 
A)  stock 
B)  bond 
C)  mortgage 
D)  federal funds 
E)  futures

Question 17

The sensitivity of the cost of funds to interest rate movements has generally been

Accepted Answer

A)  greater for credit unions than for savings institutions. 
B)  greater for credit unions than for commercial banks. 
C)  lower for credit unions than for savings institutions or commercial banks. 
D)  similar for credit unions as for savings institutions and commercial banks. 
A)  greater for credit unions than for savings institutions. 
B)  greater for credit unions than for commercial banks. 
C)  lower for credit unions than for savings institutions or commercial banks. 
D)  similar for credit unions as for savings institutions and commercial banks.

Question 18

____ are nonprofit organizations composed of members with a common bond.

Accepted Answer

A)  Credit unions 
B)  Savings banks 
C)  Savings and loan associations 
D)  Commercial banks 
A)  Credit unions 
B)  Savings banks 
C)  Savings and loan associations 
D)  Commercial banks

Question 19

Because credit unions' sources and uses of funds are generally interest rate ____, movements in interest revenues and interest expenses of credit unions are ____.

Accepted Answer

A)  sensitive; negatively correlated 
B)  insensitive; highly correlated 
C)  sensitive; uncorrelated 
D)  sensitive; highly correlated 
E)  insensitive; uncorrelated 
A)  sensitive; negatively correlated 
B)  insensitive; highly correlated 
C)  sensitive; uncorrelated 
D)  sensitive; highly correlated 
E)  insensitive; uncorrelated

Question 20

Savings institutions can obtain capital by:

Accepted Answer

A)  issuing stock. 
B)  repurchasing stock. 
C)  borrowing from the Federal Reserve. 
D)  borrowing in the federal funds market. 
A)  issuing stock. 
B)  repurchasing stock. 
C)  borrowing from the Federal Reserve. 
D)  borrowing in the federal funds market.

Exam 21: Thrift Operations

A savings institution's cash flows are ____ related to interest rate movements.

Because credit unions ____ stock, they are technically owned by the ____.

If a savings institution's assets have a considerably longer duration than its liabilities, it can reduce its exposure to interest rate risk by

Because savings institutions commonly use long-term liabilities to finance short-term assets, they depend on additional deposits to accommodate withdrawal requests.

Credit unions use the majority of their funds to

Because credit unions are for-profit organizations, their income is taxable.

Stock-owned savings institutions ____ susceptible to unfriendly takeovers. Mutual savings institutions ____ susceptible to unfriendly takeovers.

Which of the following is not an objective of a credit union?

In general, when interest rates fall, a savings institution's cost of obtaining funds declines more than the decline in the interest earned on its loans and investments.

The capital of savings institutions is primarily composed of retained earnings and funds obtained from issuing stock.

The primary use of credit union funds is

Credit unions are unregulated as to the types of services they offer.

The National Credit Union Administration (NCUA) is responsible for regulating savings institutions.

High economic growth results in more risk for a savings institution, since its consumer loans, mortgage loans, and investments in debt securities are more likely to default.

Most mortgages originated by savings institutions are for

To obtain short-term funds, savings institutions commonly borrow funds in the ____ market.

The sensitivity of the cost of funds to interest rate movements has generally been

____ are nonprofit organizations composed of members with a common bond.

Because credit unions' sources and uses of funds are generally interest rate ____, movements in interest revenues and interest expenses of credit unions are ____.

Savings institutions can obtain capital by:

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

Because credit unions stock, they are technically owned by the .

Stock-owned savings institutions susceptible to unfriendly takeovers. Mutual savings institutions susceptible to unfriendly takeovers.

Because credit unions' sources and uses of funds are generally interest rate , movements in interest revenues and interest expenses of credit unions are .