Exam 10: The Investment Function in Financial-Services Management

Long-term debt obligations of major corporations (with maturities beyond five years)are known as _______________________.

Investment securities are expected to "dress up" a bank's balance sheet,according to the textbook.

_________________________ is the risk that a bank may have to sell a part of its investment portfolio before maturity for a capital loss.

The Dakota National Bank has purchased a security issued by the state of Tennessee that has 20 years to maturity.What type of security has it purchased?

Which of the following would not be considered a bank-qualified municipal security?

One investment maturity strategy,called the front-end loaded policy,requires that the bank put all of its investment portfolio in long-term securities.

An investor can invest in either a tax-exempt security that pays 5%,or a taxable corporate security of comparable risk and maturity that pays 8%.At what marginal tax rate will the investor be indifferent between these two securities?

A bank's promise to pay the holder a designated amount of money,on a designated future date,and often used in international trade is known as a(n):

A bond has eight years to maturity and a coupon rate of 6.5 percent.Coupon payments are made annually and the bond has a face value of $1,000.The bond is currently selling in the market for $862.If this bond is sold at the end of four years for $1046 (ex-interest),what is the holding period return on this bond?

Lower interest rates increase the present value of all projected cash flows from a loan-backed security resulting in a rise in its market value.

Which of the following is a characteristic of Treasury bills?

Interest income and capital gains from a bank's portfolio of investment securities are taxed in the United States as ordinary income.

Stripped mortgage-backed securities make maturity matching of bank assets and liabilities easier to accomplish than do most other investment securities that banks buy.

The Ferson National Bank is thinking about purchasing a municipal bond that pays a coupon of 5.5%.This bank has a marginal tax rate of 30%.What is the after-tax yield on this bond?

A money market security which represents a bank's commitment to pay a stipulated amount of money,on a specific future date,under specific conditions,and which is often used in international trade is known as a(n)________________________.

_________________________ are instruments which have less than one year to reach maturity.

An investment maturity strategy which calls for a bank to put all of its investment assets into very long-term securities is called the:

Which of the following is also referred to as a bank's crossroads account?

In recent years security dealers have assembled pools of federal agency securities whose interest yield may be periodically reset based on what happens to a stated interest rate,or may carry multiple coupon rates that are periodically adjusted;the foregoing describes a:

The Terrell State Bank is a small bank located in Guyman,Oklahoma.All of its loans are agriculture and small business loans in Guyman.It wants to buy a municipal bond from the state of South Carolina.What type of risk is it likely trying to reduce with this purchase?