Exam 14: Investment Banking, insurance, and Other Sources of Fee Income

Trust services have no impact on the deposits of the bank.

One attractive feature of investment banking is that it is generally less risky than commercial banking.

_________________________ arise from the potential cost savings that result from being able to use the same management,advertising,and physical resources to offer multiple services.

According to the textbook,one likely outcome of the 2007-2009 financial crisis for both commercial and investment banks is _________________.

An insurance product or annuity sold by a depository institution is not insured by the FDIC.

_________________ is the purchase for resale of new stocks,bonds,and other financial instruments in the money and capital markets on behalf of clients who need to raise new money.

Which of the following trust agreements allows wealth to be passed free of gift and estate taxes?

Mutual funds were first set up in France.

The trust department can be a significant source of ____________ for a bank or financial holding company.

Which of the following activities of a bank falls under the insurance sales and underwriting services?

A bank would offer insurance services in addition to traditional banking services if it believed in the potential benefits of:

For which of the following banking services can the bank be legally liable for losses due to failure to act as a prudent decision maker?

As a consequence of recent legislation,banks,securities firms,and insurance companies have the right to apply to the Federal Reserve Board to become financial holding companies.

A(n)_________________________ is a savings instrument in which the customer makes cash payments to an investment manager who invests them in an earning asset.Later the purchaser receives a stream of income from those assets.

Under law and industry practice,a __________ is supposed to be set up between an IB's security underwriting and client advising divisions and the internal unit where proprietary trading of stocks and bonds take place,to prevent the transfer of insider information about clients.

Which of the following trust agreements is used to back the issue of securities by a corporation?

A bank is considering adding security brokerage services to the services it offers.It has estimated that the expected return and standard deviation of its traditional service are 6% and 14% respectively.It has estimated that the expected return and standard deviation of its new securities brokerage services are 14% and 24% respectively.The correlation between these services has been estimated to be -0.4 and the bank estimates that 60% of its business will be from traditional services and 40% from the new services.What is the standard deviation of the new combined firm?

When a financial institution offers a(n)__________________ mutual fund,it acts as broker for an unaffiliated mutual fund or group of funds and does not act as an investment advisor.

The product-line diversification effect occurs when the revenues generated by traditional banking service and a nontraditional banking service are not very correlated with each other and reduce the overall risk of the bank.

A bank is considering adding life insurance underwriting to the services it offers.It has estimated that the expected return and standard deviation of its traditional services are 12 percent and 6 percent respectively.It has also estimated that the expected return and standard deviation of its new underwriting services are 18 percent and 10 percent respectively.The correlation between these services has been estimated to be +0.10 and the bank estimates that 90 percent of its business will be from traditional services and 10 percent from the new underwriting services.What is the expected standard deviation of the new combination of services?