Question 1

The National Banking Act of 1863, and subsequent amendments to it,

Accepted Answer

A) created a banking system of federally chartered banks. 
B) established the Office of the Comptroller of the Currency. 
C) broadened the regulatory powers of the Federal Reserve. 
D) did all of the above. 
E) did only A and B of the above. 
A) created a banking system of federally chartered banks. 
B) established the Office of the Comptroller of the Currency. 
C) broadened the regulatory powers of the Federal Reserve. 
D) did all of the above. 
E) did only A and B of the above.

Question 2

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 3

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 4

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 5

Examples of financial services that became practical realities as the result of new computer technology include

Accepted Answer

A) credit cards. 
B) electronic banking facilities. 
C) checking accounts. 
D) all of the above. 
E) only A and B of the above. 
A) credit cards. 
B) electronic banking facilities. 
C) checking accounts. 
D) all of the above. 
E) only A and B of the above.

Question 6

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 7

Rising market interest rates in the 1960s and the 1970s, combined with regulated deposit rate ceilings,

Accepted Answer

A) worked in the short-run to give mortgage-issuing institutions a source of low-cost funds. 
B) led eventually to an outflow of deposits from depository institutions. 
C) led to financial innovations that worked to avoid these regulations. 
D) did all of the above. 
E) did only A and C of the above. 
A) worked in the short-run to give mortgage-issuing institutions a source of low-cost funds. 
B) led eventually to an outflow of deposits from depository institutions. 
C) led to financial innovations that worked to avoid these regulations. 
D) did all of the above. 
E) did only A and C of the above.

Question 8

Explain what happened to the large, free-standing investment banks as a result of the 2007-2009 financial crisis.

Accepted Answer

The 2007-2009 financial crisis had a sig

Question 9

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 10

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 11

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 12

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 13

So-called fallen angels differ from junk bonds in that

Accepted Answer

A) junk bonds refer to newly issued bonds with low credit ratings, whereas fallen angels refer to previously issued bonds which have had their credit ratings fall below Baa. 
B) junk bonds refer to previously issued bonds which have had their credit ratings fall below Baa, whereas fallen angels refer to newly issued bonds with low credit ratings. 
C) junk bonds have ratings below Baa, whereas fallen angels have ratings below C. 
D) fallen angels have ratings below Baa, whereas junk bonds have ratings below C. 
A) junk bonds refer to newly issued bonds with low credit ratings, whereas fallen angels refer to previously issued bonds which have had their credit ratings fall below Baa. 
B) junk bonds refer to previously issued bonds which have had their credit ratings fall below Baa, whereas fallen angels refer to newly issued bonds with low credit ratings. 
C) junk bonds have ratings below Baa, whereas fallen angels have ratings below C. 
D) fallen angels have ratings below Baa, whereas junk bonds have ratings below C.

Question 14

Bank failures and mergers have caused the number of commercial banks in the U.S. to decline from around ________ in the 1970s to below ________ today.

Accepted Answer

A) 25,000; 10,000 
B) 15,000; 10,000 
C) 25,000; 20,000 
D) 15,000; 5,000 
A) 25,000; 10,000 
B) 15,000; 10,000 
C) 25,000; 20,000 
D) 15,000; 5,000

Question 15

Americans are the biggest users of checks in the world but nonetheless are ahead of Europeans in the proportion of noncash payments that are made by electronic means.

Accepted Answer

A) True 
 B)False

Question 16

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.

Question 17

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 18

Economies of scope come from increasing the size of a given financial activity and economies of scale come from combining different activities to lower their costs.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Today, the United States has a dual banking system in which banks supervised by the federal government and banks supervised by the states operate side by side.

Accepted Answer

A) True 
 B)False

Exam 19: Banking Industry: Structure and Competition

The National Banking Act of 1863, and subsequent amendments to it,

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

Adjustable-rate mortgages

The modern commercial banking system began in America when the

Examples of financial services that became practical realities as the result of new computer technology include

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

Rising market interest rates in the 1960s and the 1970s, combined with regulated deposit rate ceilings,

Explain what happened to the large, free-standing investment banks as a result of the 2007-2009 financial crisis.

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

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

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

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

So-called fallen angels differ from junk bonds in that

Bank failures and mergers have caused the number of commercial banks in the U.S. to decline from around ________ in the 1970s to below ________ today.

Americans are the biggest users of checks in the world but nonetheless are ahead of Europeans in the proportion of noncash payments that are made by electronic means.

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

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

Economies of scope come from increasing the size of a given financial activity and economies of scale come from combining different activities to lower their costs.

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

Today, the United States has a dual banking system in which banks supervised by the federal government and banks supervised by the states operate side by side.

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

Bank failures and mergers have caused the number of commercial banks in the U.S. to decline from around in the 1970s to below today.