Question 1

The liabilities of depository institutions are significant components of the money supply.

Accepted Answer

A) True 
 B)False  True

Question 2

According to the text,how many of the largest corporate credit unions were ultimately declared insolvent during the recent financial crisis?

Accepted Answer

A) 0 
B) 15 
C) 12 
D) 7 
E) 5 
A) 0 
B) 15 
C) 12 
D) 7 
E) 5 E

Question 3

Large banks tend to make business decisions based on personal knowledge of customers creditworthiness and business conditions in the local communities.

Accepted Answer

A) True 
 B)False  False

Question 4

Research shows that there is a significant reduction in risk achieved by investing in as few as 6 different securities.

Accepted Answer

A) True 
 B)False

Question 5

Which function of an FI reduces transaction and information costs between a corporation and individual which may encourage a higher rate of savings?

Accepted Answer

A) Brokerage services. 
B) Asset transformation services. 
C) Information production services. 
D) Money supply management. 
A) Brokerage services. 
B) Asset transformation services. 
C) Information production services. 
D) Money supply management.

Question 6

A significant disadvantage for credit unions in competing with commercial banks is the severe restriction in the variety of products and services that they can offer.

Accepted Answer

A) True 
 B)False

Question 7

For the following problems, choose among the following major banking laws.
-This legislation sought to limit the growth of non-bank banks.

Accepted Answer

A) The McFadden Act of 1927 
B) The Glass-Steagall Act of 1933 
C) The Depository Institutions Deregulation and Monetary Control Act (DIDMC
A)  of 1980 
D) The Garn-St Germain Depository Institutions Act (DI
A)  of 1982 
E) The Competitive Equality in Banking Act (CEB
A)  of 1987
F)The Financial Institutions Reform, Recovery, and Enforcement Act (FIRRE
A)  of 1989
G)The Federal Deposit Insurance Corporation Improvement Act (FDICI
A)  of 1991
H)The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
I)Financial Services Modernization Act of 1999 
A) The McFadden Act of 1927 
B) The Glass-Steagall Act of 1933 
C) The Depository Institutions Deregulation and Monetary Control Act (DIDMC
A)  of 1980 
D) The Garn-St Germain Depository Institutions Act (DI
A)  of 1982 
E) The Competitive Equality in Banking Act (CEB
A)  of 1987
F)The Financial Institutions Reform, Recovery, and Enforcement Act (FIRRE
A)  of 1989
G)The Federal Deposit Insurance Corporation Improvement Act (FDICI
A)  of 1991
H)The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
I)Financial Services Modernization Act of 1999

Question 8

Pension and mutual funds have a lower correlation between the maturities of their assets and liabilities than do commercial banks and thrifts.

Accepted Answer

A) True 
 B)False

Question 9

The strong performance of commercial banks during the decade before 2007 was due to

Accepted Answer

A) the stability of interest rates during this period. 
B) the ability of banks to shift credit risk from their balance sheets to financial markets. 
C) the contraction of the number of banks and thrifts. 
D) the growth in the number of thrifts and credit unions. 
E)  All of the options. 
A) the stability of interest rates during this period. 
B) the ability of banks to shift credit risk from their balance sheets to financial markets. 
C) the contraction of the number of banks and thrifts. 
D) the growth in the number of thrifts and credit unions. 
E)  All of the options.

Question 10

Services provided by depository institutions have become relatively less significant as a portion of all services provided by FIs.

Accepted Answer

A) True 
 B)False

Question 11

Price and quantity restrictions in regulation are usually aimed at determining whether an FI is meeting certain

Accepted Answer

A) consumer protection guidelines. 
B) credit allocation guidelines. 
C) investor protection guidelines. 
D) safety and soundness guidelines. 
A) consumer protection guidelines. 
B) credit allocation guidelines. 
C) investor protection guidelines. 
D) safety and soundness guidelines.

Question 12

By late 2015,the number of commercial banks in the U.S.was approximately

Accepted Answer

A) 2,200. 
B) 1,680. 
C) 6,170. 
D) 5,470. 
E)  12,700. 
A) 2,200. 
B) 1,680. 
C) 6,170. 
D) 5,470. 
E)  12,700.

Question 13

All banks with assets greater than $10 billion are considered money center banks.

Accepted Answer

A) True 
 B)False

Question 14

All of the following are examples of participants in the shadow banking system EXCEPT

Accepted Answer

A) money market mutual funds (MMMFs). 
B) structured investment vehicles (SIVs). 
C) credit hedge funds. 
D) limited-purpose finance companies. 
E) credit unions. 
A) money market mutual funds (MMMFs). 
B) structured investment vehicles (SIVs). 
C) credit hedge funds. 
D) limited-purpose finance companies. 
E) credit unions.

Question 15

Credit Unions were generally less affected than other depository institutions by the recent financial crisis because

Accepted Answer

A) they had relatively more assets in consumer loans than other DIs. 
B) they had relatively more residential mortgages. 
C) they hold more government and agency securities,on average. 
D) they hold less government and agency securities,on average. 
E) they had relatively more assets in consumer loans than other DIs and they hold more government and agency securities,on average. 
A) they had relatively more assets in consumer loans than other DIs. 
B) they had relatively more residential mortgages. 
C) they hold more government and agency securities,on average. 
D) they hold less government and agency securities,on average. 
E) they had relatively more assets in consumer loans than other DIs and they hold more government and agency securities,on average.

Question 16

The Federal Reserve System has regulatory supervision over all holding company banks whether they include national- or state-chartered banks.

Accepted Answer

A) True 
 B)False

Question 17

Many households place funds with financial institutions because many FI accounts provide

Accepted Answer

A) lower denominations than other securities. 
B) flexible maturities verses other interest-earning securities. 
C) better liquidity than directly negotiated debt contracts. 
D) less price risk if interest rates change. 
E) All of the options. 
A) lower denominations than other securities. 
B) flexible maturities verses other interest-earning securities. 
C) better liquidity than directly negotiated debt contracts. 
D) less price risk if interest rates change. 
E) All of the options.

Question 18

FIs perform their intermediary function in two ways

Accepted Answer

A) they specialize as brokers between savers and users. 
B) they serve as asset transformers by purchasing primary securities and issuing secondary securities. 
C) they serve as asset transformers by purchasing secondary securities and issuing primary securities. 
D) they specialize as brokers between savers and users and they serve as asset transformers by purchasing primary securities and issuing secondary securities. 
A) they specialize as brokers between savers and users. 
B) they serve as asset transformers by purchasing primary securities and issuing secondary securities. 
C) they serve as asset transformers by purchasing secondary securities and issuing primary securities. 
D) they specialize as brokers between savers and users and they serve as asset transformers by purchasing primary securities and issuing secondary securities.

Question 19

The recent financial crisis highlighted,in retrospect,how heavily households and businesses had come to rely on FIs to act as specialists in

Accepted Answer

A) generating profits and lowering costs. 
B) risk measurement and management. 
C) investment advice and brokerage services. 
D) time intermediation and denomination mediation. 
A) generating profits and lowering costs. 
B) risk measurement and management. 
C) investment advice and brokerage services. 
D) time intermediation and denomination mediation.

Question 20

As a percent of total assets,savings institutions hold lower amounts of cash and U.S.Treasury securities than commercial banks.

Accepted Answer

A) True 
 B)False

Exam 2: Financial Services: Depository Institutions

The liabilities of depository institutions are significant components of the money supply.

According to the text,how many of the largest corporate credit unions were ultimately declared insolvent during the recent financial crisis?

Large banks tend to make business decisions based on personal knowledge of customers creditworthiness and business conditions in the local communities.

Research shows that there is a significant reduction in risk achieved by investing in as few as 6 different securities.

Which function of an FI reduces transaction and information costs between a corporation and individual which may encourage a higher rate of savings?

A significant disadvantage for credit unions in competing with commercial banks is the severe restriction in the variety of products and services that they can offer.

For the following problems, choose among the following major banking laws. -This legislation sought to limit the growth of non-bank banks.

Pension and mutual funds have a lower correlation between the maturities of their assets and liabilities than do commercial banks and thrifts.

The strong performance of commercial banks during the decade before 2007 was due to

Services provided by depository institutions have become relatively less significant as a portion of all services provided by FIs.

Price and quantity restrictions in regulation are usually aimed at determining whether an FI is meeting certain

By late 2015,the number of commercial banks in the U.S.was approximately

All banks with assets greater than $10 billion are considered money center banks.

All of the following are examples of participants in the shadow banking system EXCEPT

Credit Unions were generally less affected than other depository institutions by the recent financial crisis because

The Federal Reserve System has regulatory supervision over all holding company banks whether they include national- or state-chartered banks.

Many households place funds with financial institutions because many FI accounts provide

FIs perform their intermediary function in two ways

The recent financial crisis highlighted,in retrospect,how heavily households and businesses had come to rely on FIs to act as specialists in

As a percent of total assets,savings institutions hold lower amounts of cash and U.S.Treasury securities than commercial banks.

Why Are Financial Institutions Special

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

Technology and Other Operational Risks

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

Filters