Questions:
Question 1. Securitization refers to
a. changing the mix in a financial portfolio away from stocks and toward bonds.
b. selling directly to investors loans or securities that were formerly held by financial intermediaries.
c. banks insisting that collateral be supplied on previously unsecured loans.
d. reducing the exposure of a bank's portfolio to interest rate risk.
Question 2.What percentage of bank assets were in loans in 2012?
a. 8%
b. 20%
c. 37%
d. 60%
Question 3. In managing its liabilities to deal with liquidity problems, banks trade off
a. credit risk against interest rate risk.
b. adverse selection against moral hazard.
c. the need for available funds to meet deposit outflows against the desire for greater profit.
d. present tax liabilities against future tax liabilities.
Question 4.In banking, the spread refers to the difference between the
a. interest rate on long-term bonds and the interest rate on short-term bonds.
b. interest rate on car loans and the interest rate on home mortgages.
c. average interest rate earned on assets and the average interest rate paid on liabilities.
d. bid and asked prices on a bond.
Question 5.If you have a checking account at First National Bank, the account is
a. an asset to both you and First National.
b. a liability to both you and First National.
c. an asset to First National and a liability to you.
d. an asset to you and a liability to First National.
Question 6.Which of the following is NOT a bank liability?
a. checkable deposits
b. CDs
c. mortgage loans
d. borrowings from the Federal Reserve
Question 7.The due diligence process is
a. the process by which a firm chooses an investment bank.
b. when an investment bank researches a firm's value.
c. how an investment bank underwrites large issues.
d. the review of a prospectus by the SEC.
Question 8.A balance sheet
a. is a statement showing an individual's or a firm's financial position at a particular point in time.
b. is a statement showing an individual's or a firm's income over a period of time.
c. is a statement listing the tax liabilities incurred by an individual or a firm.
d. can be constructed for any nonfinancial firm, but cannot be constructed for a financial firm.
Question 9.The risk that increased market interest rates will cause a decline in the value of an investment bank's holdings of long-term securities is known as
a. credit risk.
b. interest-rate risk.
c. currency risk.
d. security risk.
Question 10. Any reserves beyond what is required are called
a. required reserves.
b. excess reserves.
c. secondary reserves.
d. bank capital.