Question 1

The McFadden Act's prohibition against interstate branching

Accepted Answer

A) was weakened by the introduction of shared electronic banking facilities that provide banking services nationwide. 
B) was weakened by regional compacts that allowed banks to own banks in other states in their region. 
C) impeded banks' ability to diversify their loans and take advantage of economies of scale. 
D) did all of the above. 
A) was weakened by the introduction of shared electronic banking facilities that provide banking services nationwide. 
B) was weakened by regional compacts that allowed banks to own banks in other states in their region. 
C) impeded banks' ability to diversify their loans and take advantage of economies of scale. 
D) did all of the above. D

Question 2

Bank managers look on reserve requirements as a

Accepted Answer

A) tax on deposits. 
B) subsidy on deposits. 
C) subsidy on loans. 
D) tax on loans. 
A) tax on deposits. 
B) subsidy on deposits. 
C) subsidy on loans. 
D) tax on loans. A

Question 3

Although federal banking legislation in the 1860s attempted to eliminate state-chartered banks by imposing a prohibitive tax on banknotes, these banks have been able to stay in business by

Accepted Answer

A) issuing credit cards. 
B) ignoring the regulations. 
C) issuing deposits. 
D) branching into other states. 
A) issuing credit cards. 
B) ignoring the regulations. 
C) issuing deposits. 
D) branching into other states. C

Question 4

One factor contributing to the decline in income advantages that banks once had is the increased competition from the commercial paper market, which has grown in size to over ________ percent of commercial and industrial bank loans today.

Accepted Answer

A) 20 
B) 30 
C) 40 
D) 50 
A) 20 
B) 30 
C) 40 
D) 50

Question 5

Securitization is the process of transforming illiquid financial assets such as residential mortgages into marketable securities.

Accepted Answer

A) True 
 B)False

Question 6

Credit cards date back to

Accepted Answer

A) prior to World War II. 
B) just after World War II. 
C) the early 1950s. 
D) the late 1950s. 
A) prior to World War II. 
B) just after World War II. 
C) the early 1950s. 
D) the late 1950s.

Question 7

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 8

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 9

Since 1974, commercial banks' importance as a source of funds for borrowers has shrunk dramatically, from around ________ percent of total credit advanced to near ________ percent by 2009.

Accepted Answer

A) 60; 30 
B) 40; 25 
C) 25; 20 
D) 30; 15 
A) 60; 30 
B) 40; 25 
C) 25; 20 
D) 30; 15

Question 10

The legislation that effectively prohibited banks from branching across state lines and forced all national banks to conform to the branching regulations of the state in which they reside is the

Accepted Answer

A) McFadden Act. 
B) National Banking Act. 
C) Glass-Steagall Act. 
D) Garn-St. Germain Act. 
A) McFadden Act. 
B) National Banking Act. 
C) Glass-Steagall Act. 
D) Garn-St. Germain Act.

Question 11

In 1975, financial institutions developed financial derivatives that included ________.

Accepted Answer

A) adjustable-rate mortgages 
B) futures contracts 
C) financial engineering 
D) virtual banks 
A) adjustable-rate mortgages 
B) futures contracts 
C) financial engineering 
D) virtual banks

Question 12

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 13

When and why was the Glass-Steagall Act passed? When and why was it repealed?

Accepted Answer

The answer of When and why was the Glass-Steagall Act...

Question 14

Which of the following is not expected to result from bank consolidation in the U.S.?

Accepted Answer

A) The disappearance of small community banks. 
B) The acceleration of the decline in the number of banks. 
C) Banks will be more efficient. 
D) Banks will be less likely to fail. 
A) The disappearance of small community banks. 
B) The acceleration of the decline in the number of banks. 
C) Banks will be more efficient. 
D) Banks will be less likely to fail.

Question 15

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 16

The Second Bank of the United States was denied a new charter by

Accepted Answer

A) President Andrew Jackson. 
B) Vice President John Calhoun. 
C) President Benjamin Harrison. 
D) President John Q. Adams. 
A) President Andrew Jackson. 
B) Vice President John Calhoun. 
C) President Benjamin Harrison. 
D) President John Q. Adams.

Question 17

Rising interest-rate risk ________ the ________ financial innovation.

Accepted Answer

A) increased; cost of 
B) increased; demand for 
C) reduced; cost of 
D) reduced; demand for 
A) increased; cost of 
B) increased; demand for 
C) reduced; cost of 
D) reduced; demand for

Question 18

Adjustable-rate mortgages

Accepted Answer

A) protect households against higher mortgage payments when interest rates rise. 
B) keep financial institutions' earnings high even when interest rates are falling. 
C) have many attractive attributes, explaining why so few households now seek fixed-rate mortgages. 
D) do only A and B of the above. 
E) do none of the above. 
A) protect households against higher mortgage payments when interest rates rise. 
B) keep financial institutions' earnings high even when interest rates are falling. 
C) have many attractive attributes, explaining why so few households now seek fixed-rate mortgages. 
D) do only A and B of the above. 
E) do none of the above.

Question 19

Which of the following is an example of a financial innovation introduced to avoid regulations?

Accepted Answer

A) securitization 
B) junk bond 
C) debit card 
D) sweep account 
A) securitization 
B) junk bond 
C) debit card 
D) sweep account

Question 20

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.

Exam 19: Banking Industry: Structure and Competition

The McFadden Act's prohibition against interstate branching

Bank managers look on reserve requirements as a

Although federal banking legislation in the 1860s attempted to eliminate state-chartered banks by imposing a prohibitive tax on banknotes, these banks have been able to stay in business by

One factor contributing to the decline in income advantages that banks once had is the increased competition from the commercial paper market, which has grown in size to over ________ percent of commercial and industrial bank loans today.

Securitization is the process of transforming illiquid financial assets such as residential mortgages into marketable securities.

Credit cards date back to

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

As a result of restrictive banking regulations, the United States

Since 1974, commercial banks' importance as a source of funds for borrowers has shrunk dramatically, from around ________ percent of total credit advanced to near ________ percent by 2009.

The legislation that effectively prohibited banks from branching across state lines and forced all national banks to conform to the branching regulations of the state in which they reside is the

In 1975, financial institutions developed financial derivatives that included ________.

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.

When and why was the Glass-Steagall Act passed? When and why was it repealed?

Which of the following is not expected to result from bank consolidation in the U.S.?

A smart card is a form of

The Second Bank of the United States was denied a new charter by

Rising interest-rate risk ________ the ________ financial innovation.

Adjustable-rate mortgages

Which of the following is an example of a financial innovation introduced to avoid regulations?

The Glass-Steagall Act prohibited commercial banks from

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 Why Are They so Damaging to the Economy

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

Savings Associations and Credit Unions

Finance Companies

Filters

Since 1974, commercial banks' importance as a source of funds for borrowers has shrunk dramatically, from around percent of total credit advanced to near percent by 2009.

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.

Rising interest-rate risk the financial innovation.