Question 1

The main center of the Eurodollar market is ________.

Accepted Answer

A) London 
B) Basel 
C) Paris 
D) New York 
A) London 
B) Basel 
C) Paris 
D) New York

Question 2

A firm issuing credit cards earns income from

Accepted Answer

A) loans it makes to credit card holders. 
B) payments made to it by stores on credit card purchases. 
C) payments made to it by manufacturers of the products sold in stores on credit card purchases. 
D) all of the above. 
E) only A and B of the above. 
A) loans it makes to credit card holders. 
B) payments made to it by stores on credit card purchases. 
C) payments made to it by manufacturers of the products sold in stores on credit card purchases. 
D) all of the above. 
E) only A and B of the above.

Question 3

With the creation of the Federal Deposit Insurance Corporation, member banks of the Federal Reserve System ________ to purchase FDIC insurance for their depositors, while nonmember commercial banks ________ to buy deposit insurance.

Accepted Answer

A) could choose; were required 
B) could choose; were given the option 
C) were required, could choose 
D) were required; were required 
A) could choose; were required 
B) could choose; were given the option 
C) were required, could choose 
D) were required; were required

Question 4

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 5

As a result of shared electronic banking facilities,

Accepted Answer

A) barriers to branching have become less burdensome. 
B) banking has become less competitive. 
C) both of the above have occurred. 
D) neither of the above has occurred. 
A) barriers to branching have become less burdensome. 
B) banking has become less competitive. 
C) both of the above have occurred. 
D) neither of the above has occurred.

Question 6

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 7

The regulatory system that has evolved in the United States whereby banks are regulated at the state level, the national level, or both, is known as a

Accepted Answer

A) bilateral regulatory system. 
B) tiered regulatory system. 
C) two-tiered regulatory system. 
D) dual banking system. 
A) bilateral regulatory system. 
B) tiered regulatory system. 
C) two-tiered regulatory system. 
D) dual banking system.

Question 8

Explain the innovations that have been created to lower interest-rate risk.

Accepted Answer

There have been several innovations crea

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

Which of the following are important factors in determining the degree and timing of financial innovation?

Accepted Answer

A) changes in technology 
B) changes in financial market conditions 
C) changes in regulation 
D) all of the above 
E) only A and B of the above 
A) changes in technology 
B) changes in financial market conditions 
C) changes in regulation 
D) all of the above 
E) only A and B of the above

Question 11

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 12

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

Accepted Answer

A) True 
 B)False

Question 13

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 14

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 15

The McFadden Act of 1927

Accepted Answer

A) effectively prohibited banks from branching across state lines. 
B) required that banks maintain bank capital equal to at least 6 percent of their assets. 
C) effectively required that banks maintain a correspondent relationship with large money center banks. 
D) did all of the above. 
A) effectively prohibited banks from branching across state lines. 
B) required that banks maintain bank capital equal to at least 6 percent of their assets. 
C) effectively required that banks maintain a correspondent relationship with large money center banks. 
D) did all of the above.

Question 16

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 17

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

Accepted Answer

A) The Office of the Comptroller of the Currency has the primary responsibility for state banks that are members of the Federal Reserve System. 
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 Office of the Comptroller of the Currency 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 state banks that are members of the Federal Reserve System. 
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 Office of the Comptroller of the Currency 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 18

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

Accepted Answer

A) 5,000 
B) 7,500 
C) 1,000 
D) 1,250 
A) 5,000 
B) 7,500 
C) 1,000 
D) 1,250

Question 19

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 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

The main center of the Eurodollar market is ________.

A firm issuing credit cards earns income from

With the creation of the Federal Deposit Insurance Corporation, member banks of the Federal Reserve System ________ to purchase FDIC insurance for their depositors, while nonmember commercial banks ________ to buy deposit insurance.

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

As a result of shared electronic banking facilities,

Adjustable-rate mortgages

The regulatory system that has evolved in the United States whereby banks are regulated at the state level, the national level, or both, is known as a

Explain the innovations that have been created to lower interest-rate risk.

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

Which of the following are important factors in determining the degree and timing of financial innovation?

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

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

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.

Credit cards date back to

The McFadden Act of 1927

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 are true?

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

Rising interest-rate risk ________ the ________ financial innovation.

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

With the creation of the Federal Deposit Insurance Corporation, member banks of the Federal Reserve System to purchase FDIC insurance for their depositors, while nonmember commercial banks to buy deposit insurance.

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.

Rising interest-rate risk the financial innovation.