Question 1

The most important developments that have reduced banks' income advantages in the past twenty years include

Accepted Answer

A)  the growth of the commercial paper market. 
B)  the growth of the junk bond market. 
C)  the elimination of Regulation Q ceilings. 
D)  all of the above. 
E)  only A and B of the above. 
A)  the growth of the commercial paper market. 
B)  the growth of the junk bond market. 
C)  the elimination of Regulation Q ceilings. 
D)  all of the above. 
E)  only A and B of the above.

Question 2

In 1977,________ pioneered the concept of selling new public issues of junk bonds for companies that had not yet achieved investment-grade status.

Accepted Answer

A)  Michael Milken 
B)  Roger Milliken 
C)  Ivan Boskey 
D)  Carl Ichan 
A)  Michael Milken 
B)  Roger Milliken 
C)  Ivan Boskey 
D)  Carl Ichan

Question 3

Which of the following is an advantage of forming a bank holding company?

Accepted Answer

A)  It allows ownership of several banks where branching is prohibited. 
B)  It allows owners to engage in activities related to banking that are prohibited to banks. 
C)  Both A and B of the above. 
D)  None of the above. 
A)  It allows ownership of several banks where branching is prohibited. 
B)  It allows owners to engage in activities related to banking that are prohibited to banks. 
C)  Both A and B of the above. 
D)  None of the above.

Question 4

To eliminate the abuses of the state-chartered banks,the ________ created a new banking system of federally chartered banks,supervised by the ________.

Accepted Answer

A)  National Banking Act of 1863; Office of the Comptroller of the Currency 
B)  Federal Reserve Act of 1863; Office of the Comptroller of the Currency 
C)  National Banking Act of 1863; Office of Thrift Supervision 
D)  Federal Reserve Act of 1863; Office of Thrift Supervision 
A)  National Banking Act of 1863; Office of the Comptroller of the Currency 
B)  Federal Reserve Act of 1863; Office of the Comptroller of the Currency 
C)  National Banking Act of 1863; Office of Thrift Supervision 
D)  Federal Reserve Act of 1863; Office of Thrift Supervision

Question 5

Even when an ATM is owned by a bank,states typically have special provisions that allow wider establishment of ATMs than is permissible for traditional "brick and mortar" branches.

Accepted Answer

A) True 
 B)False

Question 6

The modern commercial banking system began in America when the

Accepted Answer

A)  Bank of the United States was chartered in New York in 1801. 
B)  Bank of North America was chartered in Philadelphia in 1782. 
C)  Bank of the United States was chartered in Philadelphia in 1801. 
D)  Bank of North America was chartered in New York in 1782. 
A)  Bank of the United States was chartered in New York in 1801. 
B)  Bank of North America was chartered in Philadelphia in 1782. 
C)  Bank of the United States was chartered in Philadelphia in 1801. 
D)  Bank of North America was chartered in New York in 1782.

Question 7

Major differences between the United States and Japanese banking systems include:

Accepted Answer

A)  American banks are allowed to hold substantial equity stakes in commercial firms, whereas Japanese banks cannot. 
B)  Japanese banks are allowed to hold substantial equity stakes in commercial firms, whereas American banks cannot. 
C)  bank holding companies are illegal in Japan. 
D)  both A and C of the above. 
E)  both B and C of the above. 
A)  American banks are allowed to hold substantial equity stakes in commercial firms, whereas Japanese banks cannot. 
B)  Japanese banks are allowed to hold substantial equity stakes in commercial firms, whereas American banks cannot. 
C)  bank holding companies are illegal in Japan. 
D)  both A and C of the above. 
E)  both B and C of the above.

Question 8

One factor contributing to the decline in cost advantages that banks once had is the decline in the importance of checkable deposits from over ________ percent of banks' source of funds to ________ percent today.

Accepted Answer

A)  70; 30 
B)  60; 5 
C)  50; 20 
D)  40; 15 
A)  70; 30 
B)  60; 5 
C)  50; 20 
D)  40; 15

Question 9

Since the late 1970s,thrift institutions' importance as a source of funds for borrowers has shrunk markedly,from above ________ percent of total credit advanced to below ________ percent today.

Accepted Answer

A)  30; 20 
B)  30; 15 
C)  40; 5 
D)  20; 10 
A)  30; 20 
B)  30; 15 
C)  40; 5 
D)  20; 10

Question 10

Which of the following statements concerning bank regulation in the United States is true?

Accepted Answer

A)  The Office of the Comptroller of the Currency has the primary responsibility for national banks. 
B)  The Federal Reserve and the state banking authorities jointly have responsibility for state banks that are members of the Federal Reserve System. 
C)  The Fed has sole regulatory responsibility over bank holding companies. 
D)  All of the above are true. 
E)  Only A and B of the above are true. 
A)  The Office of the Comptroller of the Currency has the primary responsibility for national banks. 
B)  The Federal Reserve and the state banking authorities jointly have responsibility for state banks that are members of the Federal Reserve System. 
C)  The Fed has sole regulatory responsibility over bank holding companies. 
D)  All of the above are true. 
E)  Only A and B of the above are true.

Question 11

Regulations restricting branching have promoted the development of what two financial innovations?

Accepted Answer

A)  Bank consolidation and nationwide banking 
B)  Bank holding companies and automated teller machines 
C)  Money market mutual funds and sweep accounts 
D)  Reserve requirements and restrictions on interest paid on deposits 
A)  Bank consolidation and nationwide banking 
B)  Bank holding companies and automated teller machines 
C)  Money market mutual funds and sweep accounts 
D)  Reserve requirements and restrictions on interest paid on deposits

Question 12

Thrift institutions' importance as a source of funds for borrowers

Accepted Answer

A)  has shrunk from around 40 percent of total credit advanced in the late 1970s to below 30 percent today. 
B)  has shrunk from over 20 percent of total credit advanced in the late 1970s to below 10 percent today. 
C)  has expanded dramatically, from around 15 percent of total credit advanced in the late 1970s to above 25 percent today. 
D)  has expanded dramatically, from around 15 percent of total credit advanced in the late 1970s to above 30 percent today. 
A)  has shrunk from around 40 percent of total credit advanced in the late 1970s to below 30 percent today. 
B)  has shrunk from over 20 percent of total credit advanced in the late 1970s to below 10 percent today. 
C)  has expanded dramatically, from around 15 percent of total credit advanced in the late 1970s to above 25 percent today. 
D)  has expanded dramatically, from around 15 percent of total credit advanced in the late 1970s to above 30 percent today.

Question 13

An alternative corporate structure for U.S.banks that operate overseas is the Edge Act corporation,a special subsidiary engaged primarily in international banking.

Accepted Answer

A) True 
 B)False

Question 14

What are the reasons for the decline of traditional banking?

Accepted Answer

There are various reasons for crypto cur

Question 15

Discuss some of the major milestones in the development of the U.S.banking system.

Accepted Answer

Some of the major milestones in the deve

Question 16

Is the large number of banking firms in the United States an indication of a competitive banking industry? Explain why or why not.

Accepted Answer

Yes a large number of firms in banking m

Question 17

In September of 2008,the money market mutual fund Reserve Primary Fund had a price of less than $1.00 for a dollar invested.How did this happen?

Accepted Answer

A)  The fund invested in debt of Lehman Brothers, which was worthless when Lehman went broke. 
B)  The fund invested in high-yield junk bonds, which defaulted. 
C)  The fund invested in Treasuries, which yielded less than 0% returns. 
D)  This actually didn't happen. It cannot happen since the fund only invested in low-risk debt. 
A)  The fund invested in debt of Lehman Brothers, which was worthless when Lehman went broke. 
B)  The fund invested in high-yield junk bonds, which defaulted. 
C)  The fund invested in Treasuries, which yielded less than 0% returns. 
D)  This actually didn't happen. It cannot happen since the fund only invested in low-risk debt.

Question 18

A major controversy involving the U.S.banking industry in its early years was

Accepted Answer

A)  whether banks should both accept deposits and make loans or whether these functions should be separated into different institutions. 
B)  whether the federal government or the states should charter banks. 
C)  what percent of deposits banks should hold as fractional reserves. 
D)  whether banks should be allowed to issue their own bank notes. 
A)  whether banks should both accept deposits and make loans or whether these functions should be separated into different institutions. 
B)  whether the federal government or the states should charter banks. 
C)  what percent of deposits banks should hold as fractional reserves. 
D)  whether banks should be allowed to issue their own bank notes.

Question 19

A smart card is a form of

Accepted Answer

A)  stored-value card. 
B)  credit card. 
C)  debit card. 
D)  e-cash card. 
A)  stored-value card. 
B)  credit card. 
C)  debit card. 
D)  e-cash card.

Question 20

The most important developments that have reduced banks' cost advantages in the past twenty years include

Accepted Answer

A)  the growth of the junk bond market. 
B)  the competition from money market mutual funds. 
C)  the growth of securitization. 
D)  all of the above. 
E)  only A and B of the above. 
A)  the growth of the junk bond market. 
B)  the competition from money market mutual funds. 
C)  the growth of securitization. 
D)  all of the above. 
E)  only A and B of the above.

Exam 19: Banking Industry: Structure and Competition

The most important developments that have reduced banks' income advantages in the past twenty years include

In 1977,________ pioneered the concept of selling new public issues of junk bonds for companies that had not yet achieved investment-grade status.

Which of the following is an advantage of forming a bank holding company?

To eliminate the abuses of the state-chartered banks,the ________ created a new banking system of federally chartered banks,supervised by the ________.

Even when an ATM is owned by a bank,states typically have special provisions that allow wider establishment of ATMs than is permissible for traditional "brick and mortar" branches.

The modern commercial banking system began in America when the

Major differences between the United States and Japanese banking systems include:

One factor contributing to the decline in cost advantages that banks once had is the decline in the importance of checkable deposits from over ________ percent of banks' source of funds to ________ percent today.

Since the late 1970s,thrift institutions' importance as a source of funds for borrowers has shrunk markedly,from above ________ percent of total credit advanced to below ________ percent today.

Which of the following statements concerning bank regulation in the United States is true?

Regulations restricting branching have promoted the development of what two financial innovations?

Thrift institutions' importance as a source of funds for borrowers

An alternative corporate structure for U.S.banks that operate overseas is the Edge Act corporation,a special subsidiary engaged primarily in international banking.

What are the reasons for the decline of traditional banking?

Discuss some of the major milestones in the development of the U.S.banking system.

Is the large number of banking firms in the United States an indication of a competitive banking industry? Explain why or why not.

In September of 2008,the money market mutual fund Reserve Primary Fund had a price of less than $1.00 for a dollar invested.How did this happen?

A major controversy involving the U.S.banking industry in its early years was

A smart card is a form of

The most important developments that have reduced banks' cost advantages in the past twenty years include

Why Study Financial Markets and Institutions?

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation?

Why Do Interest Rates Change?

How Do Risk and Term Structure Affect Interest Rates?

Are Financial Markets Efficient?

Why Do Financial Institutions Exist?

Why Do Financial Crises Occur and

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging with Financial Derivatives

Financial Crises In Emerging Market Economies

Savings Associations and Credit Unions

Finance Companies

Filters

To eliminate the abuses of the state-chartered banks,the created a new banking system of federally chartered banks,supervised by the .

One factor contributing to the decline in cost advantages that banks once had is the decline in the importance of checkable deposits from over percent of banks' source of funds to percent today.

Since the late 1970s,thrift institutions' importance as a source of funds for borrowers has shrunk markedly,from above percent of total credit advanced to below percent today.