Question 1

CHIPS and ACH are

Accepted Answer

A) potato products of Frito Lay. 
B) check clearing systems run by the Federal Reserve. 
C) retail payment systems used in Europe. 
D) international bank regulators. 
E) wholesale electronic payment systems. 
A) potato products of Frito Lay. 
B) check clearing systems run by the Federal Reserve. 
C) retail payment systems used in Europe. 
D) international bank regulators. 
E) wholesale electronic payment systems.

Question 2

Interest rate risk is probably greatest at which of the following intermediaries?

Accepted Answer

A) Commercial banks 
B) Savings institutions 
C) Life insurers 
D) Pension funds 
A) Commercial banks 
B) Savings institutions 
C) Life insurers 
D) Pension funds

Question 3

Present value uncertainty is the risk that

Accepted Answer

A) the market value of equity will decline if interest rates change. 
B) interest income will rise by more than interest expense when rates increase. 
C) assets will be insufficient to cover loan losses. 
D) bank capital will be insufficient to cover loan losses. 
E) real interest rates will exceed nominal rates. 
A) the market value of equity will decline if interest rates change. 
B) interest income will rise by more than interest expense when rates increase. 
C) assets will be insufficient to cover loan losses. 
D) bank capital will be insufficient to cover loan losses. 
E) real interest rates will exceed nominal rates.

Question 4

In May 2007,the largest known credit card theft was discovered when it was revealed that 200 million card numbers were stolen from TJX Company. This is an example of

Accepted Answer

A) credit risk. 
B) operational risk. 
C) liquidity risk. 
D) technological risk. 
E) regulatory risk. 
A) credit risk. 
B) operational risk. 
C) liquidity risk. 
D) technological risk. 
E) regulatory risk.

Question 5

The risk that an FI may not have enough capital to offset a sudden decline in the value of its assets is called operational risk.

Accepted Answer

A) True 
 B)False

Question 6

A bank that has made floating rate loans funded by longer maturity deposits is at risk from falling interest rates.

Accepted Answer

A) True 
 B)False

Question 7

Many intermediaries,such as banks,cannot be asset transformers and match maturities of their assets and liabilities.

Accepted Answer

A) True 
 B)False

Question 8

Regulators' overall evaluation of the riskiness of a depository institution is measured by the _______________.

Accepted Answer

A) Basel Accord 
B) CRA rating 
C) CAMELS rating 
D) Exposure scale 
E) FFIEC score 
A) Basel Accord 
B) CRA rating 
C) CAMELS rating 
D) Exposure scale 
E) FFIEC score

Question 9

In year one,a bank facing reinvestment risk earns 11 percent on its assets and pays 10 percent on its liabilities. In year two,the bank had a negative profit spread of 100 basis points. Which of the following is true? In year two,

Accepted Answer

A) rates rose 100 basis points. 
B) rates rose 200 basis points. 
C) rates fell 100 basis points. 
D) rates fell 200 basis points. 
E) none of the options 
A) rates rose 100 basis points. 
B) rates rose 200 basis points. 
C) rates fell 100 basis points. 
D) rates fell 200 basis points. 
E) none of the options

Question 10

A bank invests $250 million to add the ability to provide online bill paying for its customers. Usage of the new service is at about 50 percent of expected usage. This is an example of

Accepted Answer

A) technological risk. 
B) operational risk. 
C) market risk. 
D) credit risk. 
E) derivative risk. 
A) technological risk. 
B) operational risk. 
C) market risk. 
D) credit risk. 
E) derivative risk.

CHIPS and ACH are

Interest rate risk is probably greatest at which of the following intermediaries?

Present value uncertainty is the risk that

In May 2007,the largest known credit card theft was discovered when it was revealed that 200 million card numbers were stolen from TJX Company. This is an example of

The risk that an FI may not have enough capital to offset a sudden decline in the value of its assets is called operational risk.

A bank that has made floating rate loans funded by longer maturity deposits is at risk from falling interest rates.

Many intermediaries,such as banks,cannot be asset transformers and match maturities of their assets and liabilities.

Regulators' overall evaluation of the riskiness of a depository institution is measured by the _______________.

In year one,a bank facing reinvestment risk earns 11 percent on its assets and pays 10 percent on its liabilities. In year two,the bank had a negative profit spread of 100 basis points. Which of the following is true? In year two,

A bank invests $250 million to add the ability to provide online bill paying for its customers. Usage of the new service is at about 50 percent of expected usage. This is an example of

Introduction

Determinants of Interest Rates

Interest Rates and Security Valuation

The Federal Reserve System, Monetary Policy, and Interest Rates

Money Markets

Bond Markets

Mortgage Markets

Stock Markets

Foreign Exchange Markets

Derivative Securities Markets

Commercial Banks: Industry Overview

Commercial Banks Financial Statements and Analysis

Regulation of Commercial Banks

Other Lending Institutions: Savings Institutions, Credit Unions, and Finance Companies

Insurance Companies

Securities Firms and Investment Banks

Investment Companies

Pension Funds

Managing Credit Risk on the Balance Sheet

Managing Liquidity Risk on the Balance Sheet

Managing Interest Rate Risk and Insolvency Risk on the Balance Sheet

Managing Risk Off the Balance Sheet With Derivative Securities

Managing Risk Off the Balance Sheet With Loan Sales and Securitization

Filters

Exam 19: Types of Risks Incurred by Financial Institutions

CHIPS and ACH are

Interest rate risk is probably greatest at which of the following intermediaries?

Present value uncertainty is the risk that

In May 2007,the largest known credit card theft was discovered when it was revealed that 200 million card numbers were stolen from TJX Company. This is an example of

The risk that an FI may not have enough capital to offset a sudden decline in the value of its assets is called operational risk.

A bank that has made floating rate loans funded by longer maturity deposits is at risk from falling interest rates.

Many intermediaries,such as banks,cannot be asset transformers and match maturities of their assets and liabilities.

Regulators' overall evaluation of the riskiness of a depository institution is measured by the _______________.

In year one,a bank facing reinvestment risk earns 11 percent on its assets and pays 10 percent on its liabilities. In year two,the bank had a negative profit spread of 100 basis points. Which of the following is true? In year two,

A bank invests $250 million to add the ability to provide online bill paying for its customers. Usage of the new service is at about 50 percent of expected usage. This is an example of

Introduction

Determinants of Interest Rates

Interest Rates and Security Valuation

The Federal Reserve System, Monetary Policy, and Interest Rates

Money Markets

Bond Markets

Mortgage Markets

Stock Markets

Foreign Exchange Markets

Derivative Securities Markets

Commercial Banks: Industry Overview

Commercial Banks Financial Statements and Analysis

Regulation of Commercial Banks

Other Lending Institutions: Savings Institutions, Credit Unions, and Finance Companies

Insurance Companies

Securities Firms and Investment Banks

Investment Companies

Pension Funds

Managing Credit Risk on the Balance Sheet

Managing Liquidity Risk on the Balance Sheet

Managing Interest Rate Risk and Insolvency Risk on the Balance Sheet

Managing Risk Off the Balance Sheet With Derivative Securities

Managing Risk Off the Balance Sheet With Loan Sales and Securitization

Filters