Question 1

It now appears that the predominant delivery system for banking services in the future will be

Accepted Answer

A)  Internet-only banks. 
B)  traditional banks. 
C)  traditional banks supplemented with online services. 
D)  none of the above. 
A)  Internet-only banks. 
B)  traditional banks. 
C)  traditional banks supplemented with online services. 
D)  none of the above.

Question 2

Large fluctuations in interest rates lead to

Accepted Answer

A)  substantial capital gains and losses to owners of securities. 
B)  greater uncertainty about returns on investments. 
C)  greater interest-rate risk. 
D)  all of the above. 
A)  substantial capital gains and losses to owners of securities. 
B)  greater uncertainty about returns on investments. 
C)  greater interest-rate risk. 
D)  all of the above.

Question 3

Disintermediation occurs when funds are deposited into banks and lent to borrowers.

Accepted Answer

A) True 
 B)False

Question 4

Because their members share a common bond,credit unions are typically quite small; most hold less than ________ of assets.

Accepted Answer

A)  $500,000 
B)  $10 million 
C)  $100 million 
D)  $1 billion 
A)  $500,000 
B)  $10 million 
C)  $100 million 
D)  $1 billion

Question 5

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 growth of securitization. 
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 growth of securitization. 
D)  all of the above. 
E)  only A and B of the above.

Question 6

The process in which people seeking higher interest rates take their money out of financial institutions is called ________.

Accepted Answer

A)  capital mobility 
B)  loophole mining 
C)  disintermediation 
D)  deposit jumping 
A)  capital mobility 
B)  loophole mining 
C)  disintermediation 
D)  deposit jumping

Question 7

In the usual GNMA pass-through security,the ________ has direct ownership of a pro-rata share of the portfolio of mortgage loans.

Accepted Answer

A)  seller 
B)  buyer 
C)  financial institution issuing the mortgage loan 
D)  financial institution securitizing the mortgage loan 
A)  seller 
B)  buyer 
C)  financial institution issuing the mortgage loan 
D)  financial institution securitizing the mortgage loan

Question 8

Which of the following is not a reason for the disappointing revenue growth and profits of Internet-only banks?

Accepted Answer

A)  High cost per transaction 
B)  Security concerns 
C)  Customer preferences 
D)  Technical problems 
A)  High cost per transaction 
B)  Security concerns 
C)  Customer preferences 
D)  Technical problems

Question 9

A financial innovation that enables banks to avoid the "tax" from reserve requirements by taking any balances above a certain amount in a corporation's checking account at the end of the business day and investing them in overnight securities that pay interest is called a ________.

Accepted Answer

A)  money market mutual fund 
B)  deposit rate ceiling 
C)  sweep account 
D)  disintermediation 
A)  money market mutual fund 
B)  deposit rate ceiling 
C)  sweep account 
D)  disintermediation

Question 10

Checkable deposits,a traditional source of low-cost funds for banks,have declined dramatically in importance,falling from over 60 percent of bank liabilities to less than 10 percent today.

Accepted Answer

A) True 
 B)False

Question 11

A change in the financial environment will stimulate a search by financial institutions for innovations that are likely to be profitable.

Accepted Answer

A) True 
 B)False

Question 12

As a result of restrictive banking regulations,the United States

Accepted Answer

A)  has too few banks when compared to other industrialized countries. 
B)  has banks that are quite large relative to those in other countries. 
C)  has too many banks when compared to other industrialized countries. 
D)  has both A and B of the above. 
A)  has too few banks when compared to other industrialized countries. 
B)  has banks that are quite large relative to those in other countries. 
C)  has too many banks when compared to other industrialized countries. 
D)  has both A and B of the above.

Question 13

What financial innovations are best explained as attempts to avoid regulations?

Accepted Answer

Financial innovations such as

Question 14

Checking accounts that earn interest (such as NOW accounts)were not available until ________.

Accepted Answer

A)  1962 
B)  1972 
C)  1982 
D)  1992 
A)  1962 
B)  1972 
C)  1982 
D)  1992

Question 15

The Glass-Steagall Act prohibited commercial banks from

Accepted Answer

A)  issuing equity to finance bank expansion. 
B)  engaging in underwriting of and dealing in corporate securities. 
C)  selling new issues of government securities. 
D)  purchasing any debt securities. 
A)  issuing equity to finance bank expansion. 
B)  engaging in underwriting of and dealing in corporate securities. 
C)  selling new issues of government securities. 
D)  purchasing any debt securities.

Question 16

Which of the following is a reason for the rapid expansion of international banking?

Accepted Answer

A)  The rapid growth in international trade 
B)  The growth of multinational corporations 
C)  The desire of U.S. banks to expand 
D)  All of the above 
A)  The rapid growth in international trade 
B)  The growth of multinational corporations 
C)  The desire of U.S. banks to expand 
D)  All of the above

Question 17

The Federal Reserve Act of 1913 required that

Accepted Answer

A)  state banks be subject to the same regulations as national banks. 
B)  national banks establish branches in the cities containing Federal Reserve banks. 
C)  national banks join the Federal Reserve System. 
D)  all of the above be done. 
A)  state banks be subject to the same regulations as national banks. 
B)  national banks establish branches in the cities containing Federal Reserve banks. 
C)  national banks join the Federal Reserve System. 
D)  all of the above be done.

Question 18

What new forms of banking have been spawned by the advances in information technology of the past two decades? Is it likely that traditional banks will disappear as a result of these innovations? Why?

Accepted Answer

The advances in information technology o

Question 19

The most significant change in the economic environment that changed the demand for financial products since 1970 has been

Accepted Answer

A)  the aging of the baby-boomer generation. 
B)  the dramatic increase in the volatility of interest rates. 
C)  the dramatic increase in competition from foreign banks. 
D)  the deregulation of financial institutions. 
A)  the aging of the baby-boomer generation. 
B)  the dramatic increase in the volatility of interest rates. 
C)  the dramatic increase in competition from foreign banks. 
D)  the deregulation of financial institutions.

Question 20

There are approximately how many commercial banks in the United States currently?

Accepted Answer

A)  5,000 
B)  6,200 
C)  1,000 
D)  1,250 
A)  5,000 
B)  6,200 
C)  1,000 
D)  1,250

Exam 19: Banking Industry: Structure and Competition

It now appears that the predominant delivery system for banking services in the future will be

Large fluctuations in interest rates lead to

Disintermediation occurs when funds are deposited into banks and lent to borrowers.

Because their members share a common bond,credit unions are typically quite small; most hold less than ________ of assets.

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

The process in which people seeking higher interest rates take their money out of financial institutions is called ________.

In the usual GNMA pass-through security,the ________ has direct ownership of a pro-rata share of the portfolio of mortgage loans.

Which of the following is not a reason for the disappointing revenue growth and profits of Internet-only banks?

A financial innovation that enables banks to avoid the "tax" from reserve requirements by taking any balances above a certain amount in a corporation's checking account at the end of the business day and investing them in overnight securities that pay interest is called a ________.

Checkable deposits,a traditional source of low-cost funds for banks,have declined dramatically in importance,falling from over 60 percent of bank liabilities to less than 10 percent today.

A change in the financial environment will stimulate a search by financial institutions for innovations that are likely to be profitable.

As a result of restrictive banking regulations,the United States

What financial innovations are best explained as attempts to avoid regulations?

Checking accounts that earn interest (such as NOW accounts)were not available until ________.

The Glass-Steagall Act prohibited commercial banks from

Which of the following is a reason for the rapid expansion of international banking?

The Federal Reserve Act of 1913 required that

What new forms of banking have been spawned by the advances in information technology of the past two decades? Is it likely that traditional banks will disappear as a result of these innovations? Why?

The most significant change in the economic environment that changed the demand for financial products since 1970 has been

There are approximately how many commercial banks in the United States currently?

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

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