Question 1

Which of the following are true statements concerning bank holding companies?

Accepted Answer

A) Bank holding companies own almost all large banks. 
B) Bank holding companies have experienced dramatic growth in the past twenty-five years. 
C) Through a loophole in the McFadden Act, bank holding companies have successfully evaded interstate branching restrictions. 
D) All of the above are true. 
E) Only A and B of the above are true. 
A) Bank holding companies own almost all large banks. 
B) Bank holding companies have experienced dramatic growth in the past twenty-five years. 
C) Through a loophole in the McFadden Act, bank holding companies have successfully evaded interstate branching restrictions. 
D) All of the above are true. 
E) Only A and B of the above are true.

Question 2

The bundling of mortgages into a saleable security (usually for large institutional investors)is called ________.

Accepted Answer

A) disintermediation 
B) quasi-intermediation 
C) futures bundling 
D) hedge optioning 
E) securitization 
A) disintermediation 
B) quasi-intermediation 
C) futures bundling 
D) hedge optioning 
E) securitization

Question 3

A special subsidiary of a U.S. bank that is engaged in international banking is called

Accepted Answer

A) an international banking facility. 
B) an agency office. 
C) an Edge Act corporation. 
D) a foreign bank subsidiary. 
A) an international banking facility. 
B) an agency office. 
C) an Edge Act corporation. 
D) a foreign bank subsidiary.

Question 4

In a ________ banking system, commercial banks provide a full range of banking, securities, and insurance services, all within a single legal entity.

Accepted Answer

A) universal 
B) British-style universal 
C) barrier-free 
D) seamless 
A) universal 
B) British-style universal 
C) barrier-free 
D) seamless

Question 5

The Federal Reserve Act required all ________ banks to become members of the Federal Reserve System, while ________ banks could choose to become members of the system.

Accepted Answer

A) state; national 
B) state; municipal 
C) national; state 
D) national; municipal 
A) state; national 
B) state; municipal 
C) national; state 
D) national; municipal

Question 6

What new forms of making payments have been spawned by the advances in information technology of the past two decades? Is it likely that ours will become a cashless society anytime soon as a result of these innovations? Why?

Accepted Answer

The advances in information technology o

Question 7

The prohibition against banks underwriting corporate securities and engaging in brokerage, real estate, and insurance activities was repealed by the

Accepted Answer

A) Gramm-Leach-Bliley Financial Services Modernization Act. 
B) Competitive Equality in Banking Act. 
C) Depositary Institution Deregulation and Monetary Control Act. 
D) Glass-Steagall Act. 
A) Gramm-Leach-Bliley Financial Services Modernization Act. 
B) Competitive Equality in Banking Act. 
C) Depositary Institution Deregulation and Monetary Control Act. 
D) Glass-Steagall Act.

Question 8

With the creation of the Federal Deposit Insurance Corporation,

Accepted Answer

A) member banks of the Federal Reserve System were given the option to purchase FDIC insurance for their depositors, while nonmember commercial banks were required to buy deposit insurance. 
B) member banks of the Federal Reserve System were required to purchase FDIC insurance for their depositors, while nonmember commercial banks could choose to buy deposit insurance. 
C) both member and nonmember banks of the Federal Reserve System were required to purchase FDIC insurance for their depositors. 
D) both member and nonmember banks of the Federal Reserve System could choose, but were not required, to purchase FDIC insurance for their depositors. 
A) member banks of the Federal Reserve System were given the option to purchase FDIC insurance for their depositors, while nonmember commercial banks were required to buy deposit insurance. 
B) member banks of the Federal Reserve System were required to purchase FDIC insurance for their depositors, while nonmember commercial banks could choose to buy deposit insurance. 
C) both member and nonmember banks of the Federal Reserve System were required to purchase FDIC insurance for their depositors. 
D) both member and nonmember banks of the Federal Reserve System could choose, but were not required, to purchase FDIC insurance for their depositors.

Question 9

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 10

Adjustable-rate mortgages

Accepted Answer

A) benefit homeowners when interest rates are falling. 
B) reduce financial institutions' interest-rate risk. 
C) reduce households' risk of having to pay higher mortgage payments when interest rates rise. 
D) do only A and B of the above. 
A) benefit homeowners when interest rates are falling. 
B) reduce financial institutions' interest-rate risk. 
C) reduce households' risk of having to pay higher mortgage payments when interest rates rise. 
D) do only A and B of the above.

Question 11

The government institution that has responsibility for the amount of money and credit supplied in the economy as a whole is the

Accepted Answer

A) central bank. 
B) commercial bank. 
C) bank of settlement. 
D) Treasury Department. 
A) central bank. 
B) commercial bank. 
C) bank of settlement. 
D) Treasury Department.

Question 12

The most important source of the changes in supply conditions that stimulate financial innovation has been the

Accepted Answer

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

Question 13

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 14

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

The answer of Is the large number of banking firms...

Question 15

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

Accepted Answer

A) the elimination of Regulation Q ceilings. 
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 elimination of Regulation Q ceilings. 
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.

Question 16

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 17

High-yield bonds rated below investment grade by the bond-rating agencies are frequently referred to as ________.

Accepted Answer

A) municipal bonds 
B) Yankee bonds 
C) "fallen angels" 
D) junk bonds 
A) municipal bonds 
B) Yankee bonds 
C) "fallen angels" 
D) junk bonds

Question 18

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 19

"Stripping" a Treasury bond

Accepted Answer

A) means selling each of its future payments as a separate zero-coupon bond. 
B) decreases the total present discounted value of future payments. 
C) both A and B. 
D) none of the above. 
A) means selling each of its future payments as a separate zero-coupon bond. 
B) decreases the total present discounted value of future payments. 
C) both A and B. 
D) none of the above.

Question 20

The growing use and proliferation of ATMs has been stimulated by

Accepted Answer

A) lower transaction costs. 
B) greater customer convenience. 
C) declining cost of the ATM equipment. 
D) all of the above. 
A) lower transaction costs. 
B) greater customer convenience. 
C) declining cost of the ATM equipment. 
D) all of the above.

Exam 19: Banking Industry: Structure and Competition

Which of the following are true statements concerning bank holding companies?

The bundling of mortgages into a saleable security (usually for large institutional investors)is called ________.

A special subsidiary of a U.S. bank that is engaged in international banking is called

In a ________ banking system, commercial banks provide a full range of banking, securities, and insurance services, all within a single legal entity.

The Federal Reserve Act required all ________ banks to become members of the Federal Reserve System, while ________ banks could choose to become members of the system.

What new forms of making payments have been spawned by the advances in information technology of the past two decades? Is it likely that ours will become a cashless society anytime soon as a result of these innovations? Why?

The prohibition against banks underwriting corporate securities and engaging in brokerage, real estate, and insurance activities was repealed by the

With the creation of the Federal Deposit Insurance Corporation,

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

Adjustable-rate mortgages

The government institution that has responsibility for the amount of money and credit supplied in the economy as a whole is the

The most important source of the changes in supply conditions that stimulate financial innovation has been the

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

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

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

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.

High-yield bonds rated below investment grade by the bond-rating agencies are frequently referred to as ________.

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.

"Stripping" a Treasury bond

The growing use and proliferation of ATMs has been stimulated by

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

The Federal Reserve Act required all banks to become members of the Federal Reserve System, while banks could choose to become members of the system.

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.