Question 1

As of 2015,the combined value of payments sent over Fedwire and the Clearing House Internet Payment System (CHIPS)often exceeded $5.0 trillion a day.

Accepted Answer

A) True 
 B)False

Question 2

Regulators have proposed that operational risk should be measured for the purpose of meeting overall capital adequacy.

Accepted Answer

A) True 
 B)False

Question 3

Increases in the rate of innovation of new financial products,whether successful or not,is often credited to advances in technology.

Accepted Answer

A) True 
 B)False

Question 4

As of December 2014,which of the following accounts for the highest volume of noncash transactions worldwide?

Accepted Answer

A) Checks. 
B) Card payments. 
C) Debit transfers. 
D) E-money payments. 
A) Checks. 
B) Card payments. 
C) Debit transfers. 
D) E-money payments.

Question 5

Cross-market selling of financial products requires production of the products within the same branch or bank office.

Accepted Answer

A) True 
 B)False

Question 6

Losses attributable to the cybercriminals known as the Carbanak group are estimated to be as high as $1.0 billion.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is NOT a retail banking service?

Accepted Answer

A) Check deposit services. 
B) Point of sale/debit cards. 
C) Telephone bill paying services. 
D) Pre-authorized debits/credits. 
A) Check deposit services. 
B) Point of sale/debit cards. 
C) Telephone bill paying services. 
D) Pre-authorized debits/credits.

Question 8

As of December 2014,which of the following represented the highest percent of the dollar value of noncash transactions in the United States?

Accepted Answer

A) Credit transfers. 
B) Card payments. 
C) Debit transfers . 
D) E-money payments. 
E) credit transfers. 
A) Credit transfers. 
B) Card payments. 
C) Debit transfers . 
D) E-money payments. 
E) credit transfers.

Question 9

CHIPS guarantees that any wire transfer is final at the time it is made.

Accepted Answer

A) True 
 B)False

Question 10

The U.S.tax burden faced by domestic FIs has been minimized,in part,by the ability to use international wire networks for the transfer of funds.

Accepted Answer

A) True 
 B)False

Question 11

Settlement risk is important because

Accepted Answer

A) of the interdependent nature of many international transactions. 
B) of the impact on sovereign country risk. 
C) problems may induce countries to limit the freedom of international capital flows. 
D) the electronic funds transfer network itself may become insolvent. 
A) of the interdependent nature of many international transactions. 
B) of the impact on sovereign country risk. 
C) problems may induce countries to limit the freedom of international capital flows. 
D) the electronic funds transfer network itself may become insolvent.

Question 12

According to economic theory involving economies of scale,larger and more cost-efficient FIs should prevail over smaller,less cost-efficient FIs.

Accepted Answer

A) True 
 B)False

Question 13

Delaware and South Dakota have become leading states in the distribution of some financial services because of liberal regulations.

Accepted Answer

A) True 
 B)False

Question 14

Large scale investments in technology may lead to diseconomies of scale due to excess capacity,cost overruns,and cost control problems.

Accepted Answer

A) True 
 B)False

Question 15

As of December 2014,which of the following accounts for the highest volume of noncash transactions in the United States?

Accepted Answer

A) Checks. 
B) Card payments. 
C) Debit transfers. 
D) E-money payments. 
A) Checks. 
B) Card payments. 
C) Debit transfers. 
D) E-money payments.

Question 16

A new computer system is expected to cost $40 million and generate annual savings of $12 million over the next five years.

Should the bank invest in this project if the discount rate is 12 percent?

Accepted Answer

A) Yes,because the net present value of the project is $3,257,314. 
B) No,because the net present value of the project is -$3,257,314. 
C) Yes,because the net present value of the project is $20 million. 
D) No,because the net present value of the project is -$20 million. 
A) Yes,because the net present value of the project is $3,257,314. 
B) No,because the net present value of the project is -$3,257,314. 
C) Yes,because the net present value of the project is $20 million. 
D) No,because the net present value of the project is -$20 million.

Question 17

Suppose that the doubling of a bank's deposit funding allows the bank to triple its loan output.What can you conclude about the bank's production technology?

Accepted Answer

A) It exhibits economies of scale using the production approach. 
B) It exhibits diseconomies of scale using the production approach. 
C) It exhibits diseconomies of scale using the intermediation approach. 
D) It exhibits economies of scale using the intermediation approach. 
A) It exhibits economies of scale using the production approach. 
B) It exhibits diseconomies of scale using the production approach. 
C) It exhibits diseconomies of scale using the intermediation approach. 
D) It exhibits economies of scale using the intermediation approach.

Question 18

Which of the following occurs if the costs of joint production of FI services are higher than they would be if they were produced independently?

Accepted Answer

A) Economies of scale. 
B) Diseconomies of scale. 
C) Economies of scope. 
D) Diseconomies of scope. 
A) Economies of scale. 
B) Diseconomies of scale. 
C) Economies of scope. 
D) Diseconomies of scope.

Question 19

Currently,banks issue well over half of all new credit cards.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following partially explains why cash management services have not attracted customers in Europe to the degree that they have in the U.S.?

Accepted Answer

A) Prevalence of nationwide branching and banking in Europe. 
B) Prevalence of interregional banking restrictions in Europe. 
C) Prohibitive charges imposed for the use of domestic telephone lines in Europe. 
D) Prohibitive charges imposed on such services in Europe. 
A) Prevalence of nationwide branching and banking in Europe. 
B) Prevalence of interregional banking restrictions in Europe. 
C) Prohibitive charges imposed for the use of domestic telephone lines in Europe. 
D) Prohibitive charges imposed on such services in Europe.

Exam 17: Technology and Other Operational Risks

As of 2015,the combined value of payments sent over Fedwire and the Clearing House Internet Payment System (CHIPS)often exceeded $5.0 trillion a day.

Regulators have proposed that operational risk should be measured for the purpose of meeting overall capital adequacy.

Increases in the rate of innovation of new financial products,whether successful or not,is often credited to advances in technology.

As of December 2014,which of the following accounts for the highest volume of noncash transactions worldwide?

Cross-market selling of financial products requires production of the products within the same branch or bank office.

Losses attributable to the cybercriminals known as the Carbanak group are estimated to be as high as $1.0 billion.

Which of the following is NOT a retail banking service?

As of December 2014,which of the following represented the highest percent of the dollar value of noncash transactions in the United States?

CHIPS guarantees that any wire transfer is final at the time it is made.

The U.S.tax burden faced by domestic FIs has been minimized,in part,by the ability to use international wire networks for the transfer of funds.

Settlement risk is important because

According to economic theory involving economies of scale,larger and more cost-efficient FIs should prevail over smaller,less cost-efficient FIs.

Delaware and South Dakota have become leading states in the distribution of some financial services because of liberal regulations.

Large scale investments in technology may lead to diseconomies of scale due to excess capacity,cost overruns,and cost control problems.

As of December 2014,which of the following accounts for the highest volume of noncash transactions in the United States?

A new computer system is expected to cost $40 million and generate annual savings of $12 million over the next five years. Should the bank invest in this project if the discount rate is 12 percent?

Suppose that the doubling of a bank's deposit funding allows the bank to triple its loan output.What can you conclude about the bank's production technology?

Which of the following occurs if the costs of joint production of FI services are higher than they would be if they were produced independently?

Currently,banks issue well over half of all new credit cards.

Which of the following partially explains why cash management services have not attracted customers in Europe to the degree that they have in the U.S.?

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Securities Firms and Investment Banks

Financial Services: Mutual Fund and Hedge Fund Companies

Financial Services: Insurance Companies

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loan Risk

Credit Risk: Loan Portfolio and Concentration Risk

Liquidity Risk

Foreign Exchange Risk

Sovereign Risk

Market Risk

Off-Balance-Sheet Risk

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

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