Question 1

If the yield curve is upward sloping:

Accepted Answer

A) investors expect the short-term interest rates to fall in the future. 
B) investors often shift their investment holdings away from long-term securities. 
C) investors often short sell short-term securities. 
D) no portfolio management is required. 
E) investors often shift their investment holdings away from short-term securities. 
A) investors expect the short-term interest rates to fall in the future. 
B) investors often shift their investment holdings away from long-term securities. 
C) investors often short sell short-term securities. 
D) no portfolio management is required. 
E) investors often shift their investment holdings away from short-term securities.

Question 2

The most aggressive investment maturity strategy that calls for the bank to continually shift the maturities of its securities in response to changes in forecasts of interest rates and other economic conditions is known as:

Accepted Answer

A) barbell strategy. 
B) rate expectations approach. 
C) front-end loaded policy. 
D) ladder approach. 
E) None of the options is correct. 
A) barbell strategy. 
B) rate expectations approach. 
C) front-end loaded policy. 
D) ladder approach. 
E) None of the options is correct.

Question 3

Which of the following statements is (are)correct regarding duration?

Accepted Answer

A) In comparing two bonds with the same yield to maturity and the same maturity,a bond with a higher coupon rate will have a longer duration. 
B) In comparing two loans with the same maturity and the same interest rate,a fully amortized loan will have a shorter duration than a loan with a balloon payment. 
C) The duration will always be shorter than the maturity for all debt instruments. 
D) All of the options are correct. 
E) B and C 
A) In comparing two bonds with the same yield to maturity and the same maturity,a bond with a higher coupon rate will have a longer duration. 
B) In comparing two loans with the same maturity and the same interest rate,a fully amortized loan will have a shorter duration than a loan with a balloon payment. 
C) The duration will always be shorter than the maturity for all debt instruments. 
D) All of the options are correct. 
E) B and C

Question 4

________________ are a type of municipal bond that are backed by the full faith and credit of the issuing government.

Accepted Answer

General ob

Question 5

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

Accepted Answer

Capital ma

Question 6

________________ are a type of municipal bond that are paid only from certain stipulated sources of funds.

Accepted Answer

The answer of ________________ are a type of municipal bond...

Question 7

_____________ is a strategy of protecting securities purchased from loss of return,no matter which way interest rates go.

Accepted Answer

A) Duration 
B) Immunization 
C) Front-end loading 
D) Back-end loading 
E) Factorization 
A) Duration 
B) Immunization 
C) Front-end loading 
D) Back-end loading 
E) Factorization

Question 8

Principal roles that a financial institution's investment portfolio plays include which of the following?

Accepted Answer

A) Income stability 
B) Geographic diversification 
C) Hedging interest rate risk 
D) Backup liquidity 
E) All of the options are correct 
A) Income stability 
B) Geographic diversification 
C) Hedging interest rate risk 
D) Backup liquidity 
E) All of the options are correct

Question 9

Bankers' acceptances:

Accepted Answer

A) can be sold in the open market. 
B) are non-negotiable instruments. 
C) are always sold at a price above par value. 
D) if sold,erases the issuer's obligation to pay off at maturity. 
E) never qualify for discounting at the Federal Reserve Banks. 
A) can be sold in the open market. 
B) are non-negotiable instruments. 
C) are always sold at a price above par value. 
D) if sold,erases the issuer's obligation to pay off at maturity. 
E) never qualify for discounting at the Federal Reserve Banks.

Question 10

Which of the following asset classes is considered as the riskiest for a bank?

Accepted Answer

A) Corporate bonds 
B) Equities 
C) Real-estate 
D) Loans 
E) Municipal bonds 
A) Corporate bonds 
B) Equities 
C) Real-estate 
D) Loans 
E) Municipal bonds

Question 11

Claims against the expected income and principal generated by a pool of similar type of loans are known as ________________________.

Accepted Answer

The answer of Claims against the expected income and principal...

Question 12

Treasury bills are the long term debt obligations issued by the federal government.

Accepted Answer

A) True 
 B)False

Question 13

An important investment security popular with banks that must,by law,mature within one year from the date of issue and which has a high degree of safety and marketability is the:

Accepted Answer

A) Treasury bill. 
B) Treasury note. 
C) FNMA note. 
D) bankers' acceptance. 
E) Eurodollar CD. 
A) Treasury bill. 
B) Treasury note. 
C) FNMA note. 
D) bankers' acceptance. 
E) Eurodollar CD.

Question 14

Debt instruments issued by cities,states,and other political entities and which are exempt from federal taxes are collectively known as ________________________.

Accepted Answer

municipal

Question 15

Eurocurrency deposits that some banks purchase as investments generally carry higher market yields than domestic time deposits issued by comparable-size U.S.banks.

Accepted Answer

A) True 
 B)False

Question 16

Stripped mortgage-backed securities fully protect investors from having to reinvest their income at lower interest rates.

Accepted Answer

A) True 
 B)False

Question 17

An investment maturity strategy which calls for a bank to have all of its investment assets in very long term maturities is known as the ________________________.

Accepted Answer

back-end l

Question 18

The Farmer National Bank has purchased a bond that has a coupon rate of 11.5% and a face value of $1,000.It has 16 years to maturity and is currently selling in the market for $1,309.80.The bond makes annual coupon payments.What is the yield-to-maturity on this bond?

Accepted Answer

A) 11.5% 
B) 16% 
C) 8% 
D) 12.21% 
E) None of the options is correct 
A) 11.5% 
B) 16% 
C) 8% 
D) 12.21% 
E) None of the options is correct

Question 19

The Wesson Wisconsin State Bank has purchased a bank-qualified municipal bond with a coupon rate of 7.5%.The bank had to borrow funds to make this purchase at a cost of 6%.The bank is in the 25% tax bracket.What is the net after-tax return on this bank-qualified municipal bond?

Accepted Answer

A) 7.5% 
B) 2.7% 
C) 3.0% 
D) 1.5% 
E) None of the options is correct 
A) 7.5% 
B) 2.7% 
C) 3.0% 
D) 1.5% 
E) None of the options is correct

Question 20

The Sheets Savings and Loan Association has purchased a bond that has a coupon rate of 7.5% and a face value of $1000.It has 5 years to maturity and is currently selling in the market for $1063.The bond makes annual coupon payments.What is the duration of this bond?

Accepted Answer

A) 7.50 years 
B) 5.00 years 
C) 4.65 years 
D) 4.37 years 
E) None of the options is correct 
A) 7.50 years 
B) 5.00 years 
C) 4.65 years 
D) 4.37 years 
E) None of the options is correct

If the yield curve is upward sloping:

The most aggressive investment maturity strategy that calls for the bank to continually shift the maturities of its securities in response to changes in forecasts of interest rates and other economic conditions is known as:

Which of the following statements is (are)correct regarding duration?

________________ are a type of municipal bond that are backed by the full faith and credit of the issuing government.

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

________________ are a type of municipal bond that are paid only from certain stipulated sources of funds.

_____________ is a strategy of protecting securities purchased from loss of return,no matter which way interest rates go.

Principal roles that a financial institution's investment portfolio plays include which of the following?

Bankers' acceptances:

Which of the following asset classes is considered as the riskiest for a bank?

Claims against the expected income and principal generated by a pool of similar type of loans are known as ________________________.

Treasury bills are the long term debt obligations issued by the federal government.

An important investment security popular with banks that must,by law,mature within one year from the date of issue and which has a high degree of safety and marketability is the:

Debt instruments issued by cities,states,and other political entities and which are exempt from federal taxes are collectively known as ________________________.

Eurocurrency deposits that some banks purchase as investments generally carry higher market yields than domestic time deposits issued by comparable-size U.S.banks.

Stripped mortgage-backed securities fully protect investors from having to reinvest their income at lower interest rates.

An investment maturity strategy which calls for a bank to have all of its investment assets in very long term maturities is known as the ________________________.

The Farmer National Bank has purchased a bond that has a coupon rate of 11.5% and a face value of $1,000.It has 16 years to maturity and is currently selling in the market for $1,309.80.The bond makes annual coupon payments.What is the yield-to-maturity on this bond?

The Wesson Wisconsin State Bank has purchased a bank-qualified municipal bond with a coupon rate of 7.5%.The bank had to borrow funds to make this purchase at a cost of 6%.The bank is in the 25% tax bracket.What is the net after-tax return on this bank-qualified municipal bond?

The Sheets Savings and Loan Association has purchased a bond that has a coupon rate of 7.5% and a face value of $1000.It has 5 years to maturity and is currently selling in the market for $1063.The bond makes annual coupon payments.What is the duration of this bond?

An Overview of the Changing Financial-Services Sector

The Impact of Government Policy and Regulation on the Financial-Services Industry

The Organization and Structure of Banking and the Financial-Services Industry

Establishing New Banks, Branches, ATMs, Telephone Services, and Websites

The Financial Statements of Banks and Their Principal Competitors

Measuring and Evaluating the Performance of Banks and Their Principal Competitors

Risk Management for Changing Interest Rates: Asset-Liability Management and Duration Techniques

Investment Banking,Insurance,and Other Sources of Fee Income

Risk Management: Asset-Backed Securities, Loan Sales, Credit Standbys, and Credit Derivatives

Liquidity and Reserves Management: Strategies and Policies

Managing and Pricing Deposit Services

Managing Nondeposit Liabilities

Investment Banking, insurance, and Other Sources of Fee Income

The Management of Capital

Lending Policies and Procedures: Managing Credit Risk

Lending to Business Firms and Pricing Business Loans

Consumer Loans, Credit Cards, and Real Estate Lending

Acquisitions and Mergers in Financial-Services Management

International Banking and the Future of Banking and Financial Services

Filters

Exam 10: The Investment Function in Financial-Services Management

If the yield curve is upward sloping:

The most aggressive investment maturity strategy that calls for the bank to continually shift the maturities of its securities in response to changes in forecasts of interest rates and other economic conditions is known as:

Which of the following statements is (are)correct regarding duration?

________________ are a type of municipal bond that are backed by the full faith and credit of the issuing government.

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

________________ are a type of municipal bond that are paid only from certain stipulated sources of funds.

_____________ is a strategy of protecting securities purchased from loss of return,no matter which way interest rates go.

Principal roles that a financial institution's investment portfolio plays include which of the following?

Bankers' acceptances:

Which of the following asset classes is considered as the riskiest for a bank?

Claims against the expected income and principal generated by a pool of similar type of loans are known as ________________________.

Treasury bills are the long term debt obligations issued by the federal government.

An important investment security popular with banks that must,by law,mature within one year from the date of issue and which has a high degree of safety and marketability is the:

Debt instruments issued by cities,states,and other political entities and which are exempt from federal taxes are collectively known as ________________________.

Eurocurrency deposits that some banks purchase as investments generally carry higher market yields than domestic time deposits issued by comparable-size U.S.banks.

Stripped mortgage-backed securities fully protect investors from having to reinvest their income at lower interest rates.

An investment maturity strategy which calls for a bank to have all of its investment assets in very long term maturities is known as the ________________________.

The Farmer National Bank has purchased a bond that has a coupon rate of 11.5% and a face value of $1,000.It has 16 years to maturity and is currently selling in the market for $1,309.80.The bond makes annual coupon payments.What is the yield-to-maturity on this bond?

The Wesson Wisconsin State Bank has purchased a bank-qualified municipal bond with a coupon rate of 7.5%.The bank had to borrow funds to make this purchase at a cost of 6%.The bank is in the 25% tax bracket.What is the net after-tax return on this bank-qualified municipal bond?

The Sheets Savings and Loan Association has purchased a bond that has a coupon rate of 7.5% and a face value of $1000.It has 5 years to maturity and is currently selling in the market for $1063.The bond makes annual coupon payments.What is the duration of this bond?

An Overview of the Changing Financial-Services Sector

The Impact of Government Policy and Regulation on the Financial-Services Industry

The Organization and Structure of Banking and the Financial-Services Industry

Establishing New Banks, Branches, ATMs, Telephone Services, and Websites

The Financial Statements of Banks and Their Principal Competitors

Measuring and Evaluating the Performance of Banks and Their Principal Competitors

Risk Management for Changing Interest Rates: Asset-Liability Management and Duration Techniques

Investment Banking,Insurance,and Other Sources of Fee Income

Risk Management: Asset-Backed Securities, Loan Sales, Credit Standbys, and Credit Derivatives

Liquidity and Reserves Management: Strategies and Policies

Managing and Pricing Deposit Services

Managing Nondeposit Liabilities

Investment Banking, insurance, and Other Sources of Fee Income

The Management of Capital

Lending Policies and Procedures: Managing Credit Risk

Lending to Business Firms and Pricing Business Loans

Consumer Loans, Credit Cards, and Real Estate Lending

Acquisitions and Mergers in Financial-Services Management

International Banking and the Future of Banking and Financial Services

Filters