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230 Cards in this Set
- Front
- Back
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In the United States a commercial bank qualifies as a "bank" under federal law if it offers:
A) Consumer installment loans, CDs B) Savings deposits, commercial loans C) Checking accounts, commercial loans D) Security investments, inventory loans to business customers E) Commercial deposit accounts, consumer savings plans |
C) Checking accounts, commercial loans
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E. F. Hutton, J.C. Penney, and Sears Roebuck are among leading firms that in the1980’s organized competitors with banks that are known as:
A) Nonbank Banks B) Discount Security Brokerage Companies C) Money Market Funds D) Finance Companies E) Investment Banking Units |
A) Nonbank Banks
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A study of history shows that one of the first services offered by banks was:
A) Equipment Leasing B) Currency Exchange C) Security Brokerage and Underwriting D) Sale of Real Estate E) None of the above |
B) Currency Exchange
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Banks perform the indispensable task of:
A) Creating money without making loan. B) Absorbing the excess liquidity created by other financial institutions C) Intermediating between surplus-spending individuals or institutions and deficit-spending individuals or institutions D) Issuing risky deposits E) None of the above |
C) Intermediating between surplus-spending individuals or institutions and deficit-spending individuals or institutions
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The view that depositors hire banks to analyze the financial condition of prospective borrowers and continually evaluate the condition of outstanding loans is referred to as:
A) Delegated monitoring B) The concept of financial intermediation C) The liquidity function in banking D) Market imperfection theory E) The efficiency contribution of banking |
A) Delegated monitoring
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Which of the following has been an important trend regarding consolidation and geographic expansion in banks?
A) Increased bank branching activity B) The formation of more holding companies to purchase smaller banks C) Mergers among some of the largest banks in the industry D) A and C above E) All of the above. |
E) all of the above
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Included among leading structural trends in the U.S. banking industry in recent years are:
A) The number of independently owned banks has declined B) The average size of individual banking firms has increased C) Entry across state lines from neighboring states has increased D) A and B only E) All of the above. |
E) All of the above.
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Smaller, locally focused commercial and savings banks that offer narrower but more personalized menu of financial services are known as:
A) Money center banks B) Community banks C) Mutual Funds D) State banks E) Fringe banks. |
B) Community banks
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The banking services that includes executing buy and sell orders for security trading customers and marketing new securities to raise funds for corporations and other institutions is referred to:
A) Comprehensive Packaging B) Wrap-around Accounts C) Investment Banking D) Professional Banking E) None of the above. |
C) Investment Banking
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A bank that wires funds for the purchase of a beach house in South Carolina for a customer in Oklahoma is carrying out the __________ of banks.
A) The intermediation role B) The payment role C) The guarantor role D) The agency role E) The policy role |
B) The payment role
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Examples of imperfections in the financial system which allow banks to exist include which of the following?
A) Informational asymmetry B) Efficiency of markets C) All individuals and businesses have full information about all investment opportunities. D) All individuals and businesses have no difficulty meeting their liquidity needs on their own. E) All of the above are examples of the imperfections that exist. |
A) Informational asymmetry
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A bank which manages the investment portfolio and pays the bills of an elderly customer who is unable to do it for him or herself is carrying out the __________ of banks.
A) The intermediation role B) The payment role C) The guarantor role D) The agency role E) The policy role |
D) The agency role
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Which of the following is a trend that has affected all banks today?
A) Increased isolation of banks in the U.S. B) Decreased competition from other financial institutions C) Decreased amount of services provided by modern banks D) Rising funding costs E) Increased regulations |
D) Rising funding costs
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Which of the following is not a current trend in the banking industry?
A) The number of banks is declining B) The number of bank branches is declining C) The number of bank services is increasing D) The number of bank competitors is increasing E) Bank industry convergence |
B) The number of bank branches is declining
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Which of the following types of banks would most likely offer the largest number of financial services?
A) A retail bank B) A community bank C) A commercial bank D) A universal bank E) An international bank |
D) A universal bank
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The phenomenon of convergence refers to:
A) Financial service firms expanding into other product lines B) Firms reducing their product lines C) Bank merger activity D) Globalization in banking E) Technological innovation in banking |
A) Financial service firms expanding into other product lines
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Bank equipment leasing activity involves:
A) A bank leasing its office facilities instead of buying B) A bank buying equipment and then leasing the item to a customer C) A customer buying equipment and then leasing it to a bank D) A bank leasing computer equipment E) None of the above |
B) A bank buying equipment and then leasing the item to a customer
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Wholesale banks are those banks that:
A) Sell at a discount relative to all commercial banks B) Only make loans to the wholesale industry C) Lend almost exclusively to farmers D) Are large banks which serve corporations and government E) Have only retail customers |
D) Are large banks which serve corporations and government
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Jonathan Robbins has an account in a bank that does not have a physical branch. Jonathan does all of his banking business over the internet. What type of bank does Jonathan have his account at?
A) Virtual Bank B) Mortgage Bank C) Community Bank D) Affiliated Bank E) None of the above |
A) Virtual Bank
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The Edmond National Bank serves only the City of Edmond, Oklahoma and concentrates on providing the best possible service to this city. What type of bank is this most likely to be?
A) Virtual Bank B) Mortgage Bank C) Community Bank D) Affiliated Bank E) None of the above |
C) Community Bank
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67. The Charleston Southern Bank makes loans for families to purchase new and existing homes but does not take deposits. What type of bank is this most likely to be?
A) Virtual Bank B) Mortgage Bank C) Community Bank D) Affiliated Bank E) None of the above |
B) Mortgage Bank
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68. Which of the following is considered a fringe bank?
A) Community Bank B) Wholesale Bank C) Merchant Bank D) Payday Lender E) None of the above |
D) Payday Lender
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69. During the middle ages, banks encountered religious opposition because:
A) Loans to the poor often carried high interest rates B) Loans and deposits were primarily for wealthy customers C) The Industrial Revolution demanded new methods of making payments and obtaining credit D) Savings and wealth were lost due to war, theft and expropriation by governments E) All of the above |
A) Loans to the poor often carried high interest rates
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70. Religious opposition decreased during the Renaissance because:
A) Loans to the poor often carried high interest rates B) Loans and deposits were primarily for wealthy customers C) The Industrial Revolution demanded new methods of making payments and obtaining credit D) Savings and wealth were lost due to war, theft and expropriation by governments E) All of the above |
B) Loans and deposits were primarily for wealthy customers
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71. Banks like the Medici Bank in Italy and the Hochstetter Bank in Germany were successful because and they responded well to these new needs.
A) Loans to the poor often carried high interest rates B) Loans and deposits were primarily for wealthy customers C) The Industrial Revolution demanded new methods of making payments and obtaining credit D) Savings and wealth were lost due to war, theft and expropriation by governments E) All of the above |
C) The Industrial Revolution demanded new methods of making payments and obtaining credit
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72. Early European banks were places for safekeeping of wealth because:
A) Loans to the poor often carried high interest rates B) Loans and deposits were primarily for wealthy customers C) The industrial revolution demanded new methods of making payments and obtaining credit D) Savings and wealth were lost due to war, theft and expropriation by governments E) All of the above |
D) Savings and wealth were lost due to war, theft and expropriation by governments
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73. The U.S. government wants to prevent money laundering by drug cartels. To promote this goal, they have asked banks to report any cash deposits greater than $10,000 to the government. Which of the following roles is the bank performing?
A) The intermediation role B) The payment role C) The risk management role D) The guarantor role E) The policy role |
E) The policy role
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74. The Edmond Wine and Cheese shop wants to buy 30 cases of French Champagne on credit. Bank of America writes a letter of credit stating that the Edmond Wine and Cheese shop is a good risk and that if they do not pay off the loan, Bank of America will. Which of the following roles is the bank performing?
A) The intermediation role B) The payment role C) The risk management role D) The guarantor role E) The policy role |
D) The guarantor role
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75. Alexander Phua goes to his local bank and gets an insurance policy that protects him against loss in case he is in a car accident. Which of the following roles is the bank performing?
A) The intermediation role B) The payment role C) The risk management role D) The guarantor role E) The policy role |
C) The risk management role
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Chris Jones gets a cashier’s check from Wachovia Bank to make his down payment on a new home. Which of the following roles is the bank performing?
A) The intermediation role B) The payment role C) The risk management role D) The guarantor role E) The policy role |
B) The payment role
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77. The Bank, N.A. accepts deposits from thousands of individuals and lends that money to (among others) the Stillwater Body Shop to expand their work bays. Which of the following roles is the bank performing?
A) The intermediation role B) The payment role C) The risk management role D) The guarantor role E) The policy role |
A) The intermediation role
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78. Major trends affecting the performance of financial firms today include all of these except:
A) Greater product-line diversification B) Reduced branching C) Geographic diversification D) Convergence E) Increasing automation |
B) Reduced branching
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79. The First National Bank of Lakeland makes risky loans to business to expand and grow their businesses while at the same time accepting funds into checking accounts that are insured by the FDIC. Which of the following services is this bank offering to their customers?
A) Risky arbitrage services B) Liquidity services C) Ability of the bank to evaluate information D) Divisibility of money services E) Credit services |
A) Risky arbitrage services
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80. Jonathan Wynn knows that if he wanted to purchase a Treasury Bill, the minimum amount he would spend would be close to $10,000. He also knows that he could deposit $1,000 in a money market deposit account at a bank and earn about the same rate of interest. Jonathan does not have $10,000 to invest in a Treasury Bill. If Jonathan puts his money in the bank, which service that a bank can provide is he taking advantage of?
A) Risky arbitrage services B) Liquidity services C) Ability of the bank to evaluate information D) Divisibility of money services E) Credit services |
D) Divisibility of money services
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Nick Rodr gets a loan from the First State Bank of Guthrie to purchase a new refrigerator for his condo. What service that a bank provides is he taking advantage of?
A) Risky arbitrage services B) Liquidity services C) Ability of a bank to evaluate information D) Divisibility of money services E) Credit services |
E) Credit services
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82. Drew Davis goes to his local bank to get help developing a financial plan and making investment decisions. Which of the more recent services banks offer is Drew taking advantage of?
A) Getting a consumer loan B) Getting financial advice C) Managing cash D) Getting venture capital services E) Buying a retirement plan |
B) Getting financial advice
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The Bartholemew Bakery receives a lot of payments in cash. They deposit it in their local bank who invests the money in an interest bearing account until it is needed to pay bills. Which of the financial services banks offer is the Bartholemew bakery taking advantage of?
A) Getting a consumer loan B) Getting financial advice C) Managing cash D) Getting venture capital services E) Buying a retirement plan |
C) Managing cash
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84. MyWebCast is a new company that makes it easy for individuals to create streaming videos on the internet to share with friends and family for a small fee. MyWebCast wants to expand their offerings of video streaming services but needs cash to be able to do this. The Second National Bank of Oklahoma City, through a subsidiary, gives them the cash they need for an ownership share in the company. Which of the more recent services that banks offer is MyWebCast taking advantange of?
A) Getting a consumer loan B) Getting financial advice C) Managing cash D) Getting venture capital services E) Buying a retirement plan |
D) Getting venture capital services
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85. Chandriga Suppiah has opened a Roth IRA with North Carolina State Bank and plans on making regular contributions to this account until she retires. Which of the financial services is Chandriga taking advantage of?
A) Getting a consumer loan B) Getting financial advice C) Managing cash D) Getting venture capital services E) Buying a retirement plan |
E) Buying a retirement plan
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86. Banks with less than ___________in assets are generally called community banks.
A) More than $1 billion B) Less than $1 billion C) More than $10 billion D) Less than $1 trillion E) More than $1 trillion |
B) Less than $1 billion
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87. The principal functions and services offered by many financial-service firms today include:
A) Lending and investing money B) Making payments of behalf of customers to facilitate their purchases of goods and services C) Managing and protecting customers’ cash and other property D) Assisting customers in raising and investing funds profitably E) All of the above |
E) All of the above
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88. Which of the following is considered a depository financial institution?
A) Mortgage company B) Mutual fund C) Savings and Loan associations D) Federal Reserve E) Insurance company |
C) Savings and Loan associations
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89. Which of the following is not a purpose of bank regulation:
A) Guarantee minimal profitability of the banking system B) Provide monetary stability C) Ensure safety and soundness of banks D) Provide competitive financial system E) Protect consumers from abuses by banks |
A) Guarantee minimal profitability of the banking system
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90. During the financial crisis of 2007-2009, the collapse of Lehman Brothers and the bailout of Bear Stearns reaffirmed the importance of the fundamental principle of:
A) Superior management B) Globalization C) Government bailout D) Regulatory arbitrage E) Public trust and confidence in the system |
E) Public trust and confidence in the system
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47. Banks are regulated for which of the reasons listed below?
A) Banks are leading repositories of the public's savings. B) Banks have the power to create money. C) Banks provide businesses and individuals with loans that support consumption and investment spending. D) Banks assist governments in conducting economic policy, collecting taxes and dispensing government payments. E) All of the above. |
E) All of the above.
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48. An institutional arrangement in which federal and state authorities both have significant bank regulatory powers is referred to as:
A) Balance of Power B) Federalism C) Dual Banking System D) Cooperative Regulation E) Coordinated Control |
C) Dual Banking System
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49. The law that set up the federal banking system and provided for the chartering of national banks
was the: A) National Bank Act B) McFadden-Pepper Act C) Glass-Steagall Act D) Bank Merger Act E) Federal Reserve Act |
A) National Bank Act
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The federal law that prohibited federally supervised commercial banks from offering investment
banking services on privately issued securities is known as: A) The Glass-Steagall Act B) The Bank Merger Act C) The Depository Institutions Deregulation and Monetary Control Act D) The Federal Reserve Act E) None of the Above |
A) The Glass-Steagall Act
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The Gramm-Leach-Bliley Act (Financial Services Modernization Act) calls for linking government supervision of the financial-services firm to the types of activities that the firm undertakes. For example the insurance portion of the firm would be regulated by state insurance commissions and the banking portion of the firm would be regulated by banking regulators. This approach to government supervision of financial services is known as:
A) Consolidated regulation and supervision. B) Functional regulation. C) Services oversight. D) Umbrella supervision and regulation. E) None of the above. |
B) Functional regulation.
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52. The Federal Reserve policy tool under which the Fed attempts to bring psychological pressure to bear on individuals and institutions to conform to the Fed's policies, using letters, phone calls, and speeches, is known as:
A) Margin requirements B) Moral suasion C) Discount window supervision D) Conference and compromise E) None of the above. |
B) Moral suasion
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53. The 1994 law that allowed bank holding companies to acquire banks anywhere in the U.S. is:
A) The Glass-Steagall Act B) The Federal Deposit Insurance Corporation Improvement Act C) The National Bank Act D) The Riegle-Neal Interstate Banking and Branching Efficiency Act. E) None of the above. |
D) The Riegle-Neal Interstate Banking and Branching Efficiency Act.
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The federal law that allowed the Federal Reserve to set margin requirements is:
A) The National Banking Act. B) The McFadden-Pepper Act. C) The Glass Steagall Act. D) The Federal Reserve Act. E) None of the above. |
C) The Glass Steagall Act.
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55. Of the principal reasons for regulating banks, what was the primary purpose of the National Banking Act (1863)?
A) Protection of the public's savings B) Control of the money supply C) Providing support for government activities D) Maintaining confidence in the banking system E) Preventing banks from realizing monopoly powers |
C) Providing support for government activities
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56. Of the principal reasons for regulating banks, what was the primary purpose of the Federal Reserve Act of 1913?
A) Protection of the public's savings B) Control of the money supply C) Preventing banks from realizing monopoly powers D) Ensuring an adequate and fair supply of loans E) None of the above. |
B) Control of the money supply
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57. The law that allows lifted government deposit interest ceilings and allowed them to pay a competitive interest rate is:
A) The National Banking Act. B) The Glass Steagall Act. C) The Bank Merger Act. D) DIDMCA E) None of the above. |
D) DIDMCA
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58. The law that allows banks to affiliate with insurance companies and security brokerage firms to form financial services conglomerates is
A) The National Banking Act B) The Glass Steagall Act C) The Garn St. Germain Act D) The Riegle Neal Interstate Banking Act E) The Gramm-Leach-Bliley Act (Financial Services Modernization Act) |
E) The Gramm-Leach-Bliley Act (Financial Services Modernization Act)
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59. Of the principal reasons for regulating banks, what was the primary purpose of the Truth in Lending Law?
A) Protection of the public's savings B) Control of the money supply C) Preventing banks from realizing monopoly powers D) Ensuring an adequate and fair supply of loans E) None of the above. |
D) Ensuring an adequate and fair supply of loans
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60. Which of the following is an unresolved issue in the new century?
A) What should be done about the regulatory safety net set up to protect small depositors? B) If financial institutions are allowed to take on more risk, how can taxpayers be protected from paying the bill when more institutions fail? C) Does functional regulation actually work? D) Should regulators allow the mixing of banking and commerce? E) All of the above are unresolved issues |
E) All of the above are unresolved issues
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61. The law that made bank and nonbank depository institutions more alike in the services they could offer and allowed banks and thrifts to more fully compete with other financial institutions is:
A) The National Banking Act B) The Federal Reserve Act C) The Garn-St. Germain Act D) The Riegle-Neal Interstate Banking and Branching Efficiency Act E) The Gramm-Leach-Bliley Act (Financial Services Modernization Act) |
C) The Garn-St. Germain Act
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62. The law that allowed bank holding companies to acquire nonbank depository institutions and convert them to branches is:
A) The National Banking Act B) The Garn-St. Germain Act C) FIRREA D) The Riegle-Neal Interstate Banking and Branching Efficiency Act E) None of the Above |
C) FIRREA
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63. The equivalent of the Federal Reserve System in Europe is known as the:
A) European Union B) Bank of London C) Basle Group D) European Central Bank E) Swiss Bank Corporation |
D) European Central Bank
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64. The new financial organization created by Gramm-Leach-Bliley is the
A) Financial Holding Company B) Bank Holding Company C) European Central Bank D) Financial Service Corporation E) Financial Modernization Organization |
A) Financial Holding Company
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65. The act which requires financial institutions to share information about customer identities with government agencies is:
A) The Sarbanes-Oxley Act B) The U.S. Treasury Department Act C) The 9/11 Act D) The USA Patriot Act E) The Gramm-Leach-Bliley Act |
D) The USA Patriot Act
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The 1977 law that prevents banks from “redlining” certain neighborhoods, refusing to serve those areas is:
A) The National Banking Act B) The Garn-St. Germain Act C) FIRREA D) The Riegle-Neal Interstate Banking and Branching Efficiency Act E) Community Reinvestment Act (CRA) |
E) Community Reinvestment Act (CRA)
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Common minimum capital requirements on banks in leading industrialized nations that are based on the riskiness of their assets is imposed by:
A) The National Banking Act B) FIRREA C) The International Banking Act D) The Basel Agreement E) None of the Above |
D) The Basel Agreement
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68. The fastest growing crime in the U.S. is:
A) Financial statement misrepresentation B) Bank robberies C) Individual privacy violations D) Credit card fraud E) Identity theft |
E) Identity theft
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69. The oldest federal bank agency is the:
A) OCC B) FDIC C) FRS D) FHC E) BHC |
A) OCC
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70. The federal agency that regulates the most banks is the:
A) OCC B) FDIC C) FRS D) FHC E) BHC |
B) FDIC
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Which federal banking act requires that financial service providers establish the identity of any customers opening new accounts?
A) Sarbanes-Oxley Act B) USA Patriot Act C) Check 21 Act D) The FACT Act E) Bankruptcy Abuse Prevention and Consumer Protection Act |
B) USA Patriot Act
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72. Which federal banking act prohibits publishing false or misleading information about the financial performance of a public company and requires top corporate officers to vouch for the accuracy of their company’s financial statements?
A) Sarbanes-Oxley Act B) USA Patriot Act C) Check 21 Act D) The FACT Act E) Bankruptcy Abuse Prevention and Consumer Protection Act |
A) Sarbanes-Oxley Act
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Which federal banking act reduces the need for banks to transport paper checks across the country?
A) Sarbanes-Oxley Act B) USA Patriot Act C) Check 21 Act D) The FACT Act E) Bankruptcy Abuse Prevention and Consumer Protection Act |
C) Check 21 Act
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74. Which federal banking act forces more individuals to repay at least part of what they owe and will push higher-income borrowers into more costly forms of bankruptcy?
A) Sarbanes-Oxley Act B) USA Patriot Act C) Check 21 Act D) The FACT Act E) Bankruptcy Abuse Prevention and Consumer Protection Act |
E) Bankruptcy Abuse Prevention and Consumer Protection Act
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75. Which federal banking act requires the Federal Trade Commission to make it easier for victims of identity theft to make theft reports and requires credit bureaus to help victims resolve the problem?
A) Sarbanes-Oxley Act B) USA Patriot Act C) Check 21 Act D) The FACT Act E) Bankruptcy Abuse Prevention and Consumer Protection Act |
D) The FACT Act
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76. The _________ allows adequately capitalized bank holding companies to acquire banks in any state.
A) Riegle-Neal Interstate Banking and Branching Efficiency Act B) Competitive Equality Banking Act C) Financial Institutions Reform, Recovery and Enforcement Act D) Federal Deposit Insurance Corporation Improvement Act E) Depository Institutions Deregulation and Monetary Control Act |
A) Riegle-Neal Interstate Banking and Branching Efficiency Act
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One of the earliest theories regarding the impact of regulation on banks was developed by George Stigler. He contends that:
A) Firms in regulated industries actually seek out regulations because they bring monopolistic rents. B) Regulations shelter firms from changes in demand and cost, lowering its risk. C) Regulations can increase consumer confidence which increases customer loyalty to regulated firms. D) Depository institutions should be regulated no differently than any other corporation with no subsidies or special privileges. E) None of the above |
A) Firms in regulated industries actually seek out regulations because they bring monopolistic rents.
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78. Samual Peltzman had an opposing view to George Stigler on the impact of regulation on banks. He contends that:
A) Firms in regulated industries actually seek out regulations because they bring monopolistic rents. B) Regulations shelter firms from changes in demand and cost, lowering its risk. C) Regulations can increase consumer confidence which increases customer loyalty to regulated firms. D) Depository institutions should be regulated no differently than any other corporation with no subsidies or special privileges. E) None of the above |
B) Regulations shelter firms from changes in demand and cost, lowering its risk.
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There is an important debate raging today regarding whether banks should be regulated at all. George Benston contends that:
A) Firms in regulated industries actually seek out regulations because they bring monopolistic rents. B) Regulations shelter firms from changes in demand and cost, lowering its risk. C) Regulations can increase consumer confidence which increases customer loyalty to regulated firms. D) Depository institutions should be regulated no differently than any other corporation with no subsidies or special privileges. E) None of the above |
D) Depository institutions should be regulated no differently than any other corporation with no subsidies or special privileges.
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80. The European Central Bank has the main goal of:
A) Ensuring the economy grows at an adequate rate. B) Keeping unemployment low. C) Ensuring price stability. D) Ensuring an adequate and fair supply of loans. E) All of the above |
C) Ensuring price stability
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81. Which of the following has become the principal tool of central bank monetary policy today?
A) Open market operations B) Changing the discount rate C) Changing reserve requirements D) Using moral suasion E) None of the above |
A) Open market operations
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The Federal Reserve buys Treasury Bills in the open market. This will tend to:
A) Cause interest rates in the market to rise B) Cause interest rates in the market to fall C) Cause reserves held at the Federal Reserve to decrease D) Cause a decrease in the growth of deposits and loans E) All of the above |
B) Cause interest rates in the market to fall
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83. Which federal banking act extends deposit insurance coverage on qualified retirement accounts from $100,000 to $250,000 and authorizes the FDIC to periodically increase deposit insurance coverage to keep up with inflation?
A) Sarbanes-Oxley Act B) The Gramm-Leach-Bliley Act C) Check 21 Act D) The FACT Act E) Federal Deposit Insurance Reform Act |
E) Federal Deposit Insurance Reform Act
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The Financial Services Regulatory Relief Act of 2006 does the following:
A) Adds selected new service powers to depository institutions B) Loosens regulations on depository institutions C) Grants the Federal Reserve authority to pay interest on depository institutions’ legal reserves D) All of the above E) None of the above |
D) All of the above
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85. The Emergency Economic Stabilization Act passed in 2008 during the global credit crisis allowed the following:
A) An emergency sale of “bad assets” B) Temporary increase of FDIC deposit insurance to $250,000 for all deposits C) Injections of capital by the government into banks and other qualified lenders D) Closer surveillance of the mortgage market participants, such as brokers and lenders E) All of the above |
E) All of the above
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46. In banking, organizational form follows __________ because banks usually are organized in such a way as to carry out the tasks and supply the services demanded of them. The term that correctly fills in the blank in the sentence above is:
A) Bank size B) Management's decision C) Function D) Regulation E) Location |
C) Function
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47. Which one of the following is charged with setting policy and overseeing a bank's performance?
A) Stockholders B) Board of directors C) Regulators D) Depositors E) None of the above. |
B) Board of directors
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48. The largest banks possess some potential advantages over small and medium-size banks, according to the textbook. What specific advantage of the largest banks over small and medium-sized banks is not mentioned in the text?
A) Greater diversification geographically and by product line B) Availability of financial capital at lower cost C) Greater professional expertise to allocate capital to the most promising products and services D) Better positioned to take advantage of the opportunities afforded by interstate banking. E) All of the above were mentioned in the text as advantages typically possessed by the largest banks. |
E) All of the above were mentioned in the text as advantages typically possessed by the largest banks.
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49. Before any financial services can be offered to anyone a bank in the United States must have a:
A) Certificate of deposit insurance B) Charter of incorporation C) List of established customers D) New building constructed to be the bank's permanent home E) None of the above. |
B) Charter of incorporation
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50. In the United States there are close to __________ commercial banks in operation. Which number shown below is closest to the actual total number of U.S. banks operating in the U.S.?
A) 20,500 B) 13,500 C) 11,500 D) 9,000 E) 7,500 |
E) 7,500
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One of the few states that has opted out of interstate banking is:
A) New York B) Ohio C) Texas D) Montana E) None of the above |
D) Montana
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52. The concentration of U.S. bank deposits in the hands of the largest banks has _________ during the most recent period,
A) Declined B) Increased C) Remained essentially unchanged D) Exhibited large fluctuations in both directions E) None of above. |
B) Increased
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Bank holding company organizations have several advantages over other types of banking organizations. Among the advantages mentioned in this chapter is:
A) Greater ease of access to capital markets B) Tax advantage C) Product-line diversification D) All of the above. E) None of the above. |
D) All of the above.
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54. A company which owns the stock of three different banks is known as a(n):
A) Unit Bank B) Interstate Bank C) One Bank Holding Company D) Multi Bank Holding Company E) None of the above |
D) Multi Bank Holding Company
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Which of the following is considered an advantage of branch banking?
A) Increased availability and convenience of services B) Decreased chance of failure C) Reduced transaction costs D) B and C above E) All of the above |
E) All of the above
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56. The types of nonbank businesses a bank holding company can own include which of the following?
A) Retail Computer Store B) Security Brokerage Firm C) Retail Grocery Store D) Wholesale Electronic Distribution Company E) All of the above |
B) Security Brokerage Firm
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57. A bank which offers its full range of services from only one office is known as a:
A) Unit Bank B) Branch Bank C) Correspondent Bank D) Bank Holding Company E) None of the above |
A) Unit Bank
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58. Why did so many states and the federal government finally enact interstate banking laws?
A) The need for new capital in order to revive struggling economies B) The expansion of services by nonbank financial institutions C) Competition from neighboring states that already liberalized their laws D) Advances in technology which allowed banks to service customers in broader geographic areas E) All of the above are reasons for the passage of interstate banking laws |
E) All of the above are reasons for the passage of interstate banking laws
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59. What is a bank holding company?
A) It is a bank that offers all of its services out of one office B) It is a bank that offers all its services out of several offices C) It is a corporation formed to hold the stock of one or more banks D) It is a merchant bank E) None of the above |
C) It is a corporation formed to hold the stock of one or more banks
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60. Which of the following is a type of service a bank holding company is not allowed to own?
A) Merchant banking company B) Savings and loan association C) Retail electronics equipment sales company D) Security brokerage firm E) Insurance agency |
C) Retail electronics equipment sales company
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61. In the last decade, the number of banks has __________ and the number of branches has _________.
A) Declined; Increased B) Grown; Increased C) Grown; Decreased D) Declined; Decreased E) Stabilized; Stabilized |
A) Declined; Increased
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Websites known as electronic branches offer all of the following except:
A) Internet banking services B) ATMs C) Point of sales terminals D) Computer and phone services connecting customers E) Traveler's checks |
E) Traveler's checks
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63. Relative to manufacturing firms, banks tend to have a (the) ___________ number of board members.
A) Same B) Larger C) Smaller D) Unknown E) None of the above |
B) Larger
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64. The percentage of unit banks in the U.S. today is approximately:
A) 10% B) 30% C) 50% D) 75% E) 100% |
B) 30%
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65. The ‘typical’ community bank has:
A) $300 million in assets and is located in a smaller city in the Midwest. B) $25 billion in assets and is located in a large city in the East C) $100 million in assets and is located in a large city the South D) $10 billion in assets and is located in a small city in the West E) None of the above |
A) $300 million in assets and is located in a smaller city in the Midwest
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66. The ‘typical’ money center bank has:
A) $250 million in assets and is located in a smaller city in the Midwest B) $25 billion in assets and is located in a large city in the East C) $100 million in assets and is located in a large city in the South D) $10 billion in assets and is located in a small city in the West E) None of the above |
B) $25 billion in assets and is located in a large city in the East
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67. The majority of banks today are:
A) Federally chartered B) Uninsured C) State Chartered D) National Banks E) All of the above |
C) State Chartered
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Member’ banks are:
A) Members of the FDIC B) National Banks C) Unit Banks D) Members of the Federal Reserve E) All of the above |
D) Members of the Federal Reserve
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69. and banks tend to be larger and hold more of the public’s deposits.
A) National and Member B) State and Nonmember C) National and Uninsured D) State and Insured E) None of the above |
A) National and Member
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70. Which of the following is a reason for the rapid growth in branch banks?
A) Exodus of population from cities to suburban areas B) Bank convergence C) Business failures D) Decreased costs of brick and mortar E) All of the above |
A) Exodus of population from cities to suburban areas
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71. Under the Bank Holding Company Act control of a bank is assumed to exist only if:
A) The bank holding company acquires 100% of the bank’s stock B) The bank holding company acquires 50% or more of the bank’s stock C) The bank holding company acquires 25% or more the bank’s stock D) The bank holding company acquires three banks E) None of the above |
C) The bank holding company acquires 25% or more the bank’s stock
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72. When a bank holding company acquires a nonbank business it must be approved by:
A) The FDIC B) The Comptroller of the Currency C) The Federal Reserve D) The President of the U.S. E) All of the above |
C) The Federal Reserve
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73. Many financial experts believe that the customers most likely to be damaged by decreased competition include:
A) Large corporations in large cities B) Households and business in smaller cities and towns C) Households that earn more than a billion dollars a year D) Students away at college E) None of the above |
B) Households and business in smaller cities and towns
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74. According to Levonian and Rose in order to achieve some reduction in earnings risk, interstate banks must expand into at least:
A) 2 states B) 4 states C) 6 states D) 10 states E) 25 states |
B) 4 states
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75. The major competitors of banks have:
A) Fewer but much larger service providers B) Fewer but smaller service providers C) More but smaller service providers D) More but larger service providers E) None of the above |
A) Fewer but much larger service providers
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76. Of the following countries in Europe, which has the largest number of banks?
A) Belgium B) France C) Germany D) Great Britain E) None of the above |
C) Germany
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77. Which country’s banks were owned by the state until the 1990’s?
A) Belgium B) France C) Germany D) Italy E) None of the above |
D) Italy
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When financial service providers offer a range of services including banking, insurance and securities services it is known as:
A) Consolidation B) Convergence C) Economies of scale D) E-Efficiencies E) None of the above |
B) Convergence
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79. The gradual evolution of markets and institutions such that geographic boundaries do not restrict financial transactions is known as:
A) Deregulation B) Integration C) Re-regulation D) Globalization E) Moral suasion |
D) Globalization
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80. Banks with less than _______ in assets are generally called community banks.
A) More than $1 billion B) Less than $1 billion C) More than $5 million D) Less than $1 trillion E) More than $1 trillion |
B) Less than $1 billion
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81. Nonbank financial firms that supply insurance coverage to customers borrowing money to guarantee repayment of a loan are referred to as:
A) Merchant Bankers B) Factoring Companies C) Savings Associations D) Investment Bankers E) Credit Insurance Underwriters |
E) Credit Insurance Underwriters
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82. A financial holding companies (FHC), defined as a special type of holding company that may offer the broadest range of financial services such as securities and insurance activities, were allowed under which act?
A) Riegle-Neal Interstate Banking and Branching Efficiency Act B) The Competitive Equality in Banking Act C) The Basel Agreement D) The FDIC Improvement Act E) The Gramm-Leach-Bliley Financial Services Modernization Act |
E) The Gramm-Leach-Bliley Financial Services Modernization Act
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U.S. banking laws require the organizers of a proposed new bank to demonstrate:
A) Adequate future earnings prospects B) Adequate owners' capital will be available C) Evidence of a public need for a new bank D) Existing banks will not be endangered E) All of the above. |
E) All of the above.
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52. One of the benefits of securing a state bank charter instead of a federal bank charter is:
A) It brings added prestige B) It results in the automatic receipt of federal deposit insurance C) It is often able to lend a higher percentage of its capital and surplus to a single borrower D) A state bank must join the Federal Reserve System E) None of the above. |
C) It is often able to lend a higher percentage of its capital and surplus to a single borrower
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53. One of the benefits of securing a federal (national) bank charter instead of a state bank charter is:
A) Federal rules can pre-empt state laws B) It is generally easier and less costly to secure a federal charter C) It is often able to lend a higher percentage of its capital and surplus to a single borrower D) Lower supervisory fees E) None of the above. |
A) Federal rules can pre-empt state laws
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54. The number of bank charters issued annually in the United States has averaged about:
A) 1000 B) 2000 C) 10 D) 100 E) None of the above |
D) 100
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The existence of branch banking in a given state:
A) Encourages more new banks to be chartered B) Discourages some new banks from being chartered C) Results in more bank failures than normal D) Results in lower operating cost per unit of service E) None of the above. |
B) Discourages some new banks from being chartered
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Most new banks:
A) Become profitable in the first 3 years of their operation B) Have pro-competitive effects on the markets they enter C) Survive rather than fail D) All of the above are correct E) None of the above are correct. |
D) All of the above are correct
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Most new U.S. banks are chartered in:
A) Small communities where there is very little existing competition. B) Relatively large urban areas where organizers can earn higher expected rates of return on their investment. C) Rural areas where they will be more convenient for customers. D) All of the above. E) A and C, only. |
B) Relatively large urban areas where organizers can earn higher expected rates of return on their investment.
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A charter of incorporation to start a new U.S. bank can be issued by:
A) The Office of the Comptroller of the Currency. B) The state banking commissions of each state. C) The Federal Deposit Insurance Corporation (FDIC). D) All of the above. E) A and B, only. |
E) A and B, only.
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59. Which factor(s) does OCC assess during the application process for a national bank charter?
A) Market demand B) Probably customer base C) Competition and economic conditions D) Risks inherent in the services to be offered to the public E) All of the above |
E) All of the above
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One of the benefits of applying for a federal (national) bank charter over a state charter is:
A) It brings added prestige B) It results in the automatic receipt of federal deposit insurance C) There is better technical support in the event of problems D) A and C above. E) All of the above. |
D) A and C above.
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61. According to the textbook, the disadvantages of a federal charter include which of the following:
A) Closer supervision of banking activities. B) Stricter standards for capital. C) More stringent limits on the offering of new services. D) All of the above. E) B and C only. |
D) All of the above.
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Key factors that organizers of a proposed new bank use in evaluating their investment opportunity include which of the following?
A) Expected return on bank stock. B) Risk to the shareholders. C) Demonstrated public need. D) Track record of existing banks that serve the same or a similar area. E) All of the above. |
E) All of the above.
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64. The most desirable sites for full-service bank branch offices usually have which of the following characteristics?
A) Heavy traffic volume B) Large numbers of retail shops and stores C) Above-average age populations D) All of the above. E) None of the above. |
D) All of the above.
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65. Typically much less costly to build and maintain, costing as little as one-fourth the expense incurred in constructing and operating as a stand-alone branch, and experiencing more traffic flow than conventional branches are:
A) ATMs B) P0S terminals C) ACHs D) In-Store branches E) ALMs |
D) In-Store branches
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66. Computer facilities in retail shops and stores that permit a customer to instantly pay for goods and services electronically by deducting the cost of each purchase directly from his or her deposit account are known as:
A) ATMs B) P0S terminals C) ACHs D) In-store branches. E) ALMs |
B) P0S terminals
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A so-called PIN gives a bank customer access to his or her account through a(n):
A) ACH B) Bank-by-mail service C) ATM D) Electronic calculator E) None of the above |
C) ATM
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68. Computer terminals which allow customers to make cash withdrawals, check deposit balances and make deposits without dealing with a teller are known as:
A) ATMs B) POS terminals C) ACHs D) In-store branches E) ALMs |
A) ATMs
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Which of the following is one of the common services provided by banks on the internet today?
A) Applying for a loan B) Opening an account C) Making payments (especially recurring utility bills) D) All of the above E) None of the above |
C) Making payments (especially recurring utility bills)
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A bank is thinking about building a new branch. They think this new branch will generate 20 percent of the business of the bank after it is opened. The bank expects the return for this branch will be 15 percent with a standard deviation of 5 percent. Currently the bank has a 12 percent rate of return with a standard deviation of 4 percent. The correlation between the bank and the new branch is expected to be .25. What is this bank's total expected return after adding this branch?
A) 15 percent B) 12.6 percent C) 12 percent D) 14.4 percent |
B) 12.6 percent
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A bank is thinking about building a new branch. They think this new branch will generate 20 percent of the business of the bank after it is opened. The bank expects the return for this branch will be 15 percent with a standard deviation of 5 percent. Currently the bank has a 12 percent rate of return with a standard deviation of 4 percent. The correlation between the branch and the bank is expected to be .25. What is this bank's expected standard deviation after adding this branch?
A) 12.84 percent B) 3.35 percent C) 4.36 percent D) 3.58 percent |
D) 3.58 percent
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63. The FDIC Improvement Act of 1991 requires a bank closing one of its branches to give its customers a minimum notice of:
A) 90 days B) 60 days C) 30 days D) 10 days E) None of the above |
A) 90 days
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72. The Clearwater National Bank is thinking about building a new branch. This new branch is anticipated to generate 5 percent of the business of the bank after it is opened. The bank expects the return for this branch will be 15 percent with a standard deviation of 5 percent. Currently the bank has a 10 percent rate of return with a standard deviation of 5 percent. The correlation between the bank and the new branch is expected to be -0.3. What is this bank's total expected return after adding this branch?
A) 15 percent B) 10 percent C) 15.25 percent D) 10.25 percent |
D) 10.25 percent
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73. The Clearwater National Bank is thinking about building a new branch. This new branch is anticipated to generate 5 percent of the business of the bank after it is opened. The bank expects the return for this branch will be 15 percent with a standard deviation of 5 percent. Currently the bank has a 10 percent rate of return with a standard deviation of 5 percent. The correlation between the bank and the new branch is expected to be -0.3. What is this bank's expected risk (measured by the standard deviation) after adding this branch?
A) 21.91 percent B) 12.84 percent C) 4.68 percent D) 3.58 percent |
C) 4.68 percent
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74. In the above problem, the proposed new branch will _______ overall risk exposure and produce a(an) ______ effect. Fill in the appropriate answers.
A) increases; economies of scale B) increases; economies of scope C) reduces; convergence D) reduces; geographic diversification 73. The Clearwater National Bank is thinking about building a new branch. This new branch is anticipated to generate 5 percent of the business of the bank after it is opened. The bank expects the return for this branch will be 15 percent with a standard deviation of 5 percent. Currently the bank has a 10 percent rate of return with a standard deviation of 5 percent. The correlation between the bank and the new branch is expected to be -0.3. What is this bank's expected risk (measured by the standard deviation) after adding this branch? |
D) reduces; geographic diversification
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75. In the U.S, what is the average population per branch office?
A) 4000 B) 8000 C) 10,000 D) 15,000 E) None of the above |
A) 4000
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76. Suppose Second National Bank is considering adding 5 new ATM machines. Each machine costs $25,000 and installation costs are $15,000 per machine. Second National Bank expects the new machines to save $.33 per transaction and expects 250,000 transactions per year on the new machines. They expect the new machines to last for 15 years. If Second National Bank needs to earn 14 percent interest on this investment, what is the net present value of this investment?
A) $506,729 B) $306,729 C) $272,269 D) 381,729 |
B) $306,729
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77. Suppose Third State Bank wants to add a new branch office. They have determined that the cost of construction on the new facility will be $1.5 million with another $500,000 in organizational costs. Third State Bank has estimated that they will generate $319,522 in net revenues. If the new branch is expected to last 20 years, what is the expected rate or return on this investment? (Round to the nearest whole percent)
A) 6 percent B) 21 percent C) 15 percent D) 32 percent |
C) 15 percent
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78. Suppose Third State Bank wants to add a new branch office. They have determined that the cost of construction on the new facility will be $1.5 million with another $500,000 in organizational costs. Third State Bank has estimated that they will generate $319,522 in net revenues. If the Third State Bank requires a 17% return on its money, what is this project’s net present value?
A) $201,805 B)-$201,805 C) $1,798,195 D) -$1,798,195 |
B)-$201,805
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79. Which of the following is true concerning branch offices?
A) The number of full service offices in the U.S. have shrunk in recent years. B) An ideal location for a new branch bank is one with below average population density C) Branch offices are generally cheaper to establish than chartering a whole new banking corporation D) The decision about whether to establish a new branch is a cash management problem E) All of the above are true |
C) Branch offices are generally cheaper to establish than chartering a whole new banking corporation
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80. Murphy National Bank is thinking about adding a new branch in a very different market area. They estimate that the new office will have an expected return of 16% with a standard deviation of 8%. Currently they have an expected return of 12% with a standard deviation of 4%. The correlation between the new branch and the bank is estimated to be .20. The bank estimates that the new branch will represent 15 percent of the revenues of the bank. What is the expected return of the bank with the new branch?
A) 12.6 percent B) 15.4 percent C) 4.6 percent D) 7.4 percent |
A) 12.6 percent
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81. Murphy National Bank is thinking about adding a new branch in a very different market area. They estimate that the new office will have an expected return of 16% with a standard deviation of 8%. Currently they have an expected return of 12% with a standard deviation of 4%. The correlation between the new branch and the bank is estimated to be .20. The bank estimates that the new branch will represent 15 percent of the revenues of the bank. What is the bank's expected risk (measured by the standard deviation) with the new branch? Round to the nearest .1 percent.
A) 14.6 percent B) 3.8 percent C) 4.6 percent D) 7.4 percent |
B) 3.8 percent
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82. In what merger region of the country do the most newly-chartered banks occur?
A) Northeast B) Southeast C) Midwest D) Southwest E) West |
B) Southeast
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83. In the short-term newly-chartered banks fail at a (n) __________ rate than established banks.
A) lower B) same C) higher D) extremely higher E) unknown |
A) lower
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84. Chester National Bank is considering adding a new branch bank. They know that it will cost $2.5 million to build the branch and they believe that it will generate $214,526 per year for the next 25 years. Chester National Bank requires a return of 10% on all new projects it undertakes. What is this project’s net present value? (Round to the nearest $100)
A) -$552,700 B) -$3,052,700 C) $1,947,300 D) $2,863,200 E) $5,363,200 |
A) -$552,700
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85. Chester National Bank is considering adding a new branch bank. They know that it will cost $2.5 million to build the branch and they believe that it will generate $214,526 per year for the next 25 years. Chester National Bank requires a return of 10% on all new projects it undertakes. What is this project’s expected rate of return or internal rate of return? (Round to the nearest whole percent)
A) 10% B) 7% C) 12% D) 2% E) 25% |
B) 7%
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86. The Chahad Bank wants to open a new branch in a distance city with very different economic conditions. Currently, the bank has an expected return of 15% with a standard deviation of 7%. The new branch is expected to have a return of 20% with a standard deviation of 10%. The correlation between the bank and the new branch is -.3. The new branch is expected to be 10% of the bank’s revenues. What is the expected return of the bank if they add the new branch?
A) 35% B) 19.5% C) 17.5% D) 15.5% E) None of the above |
D) 15.5%
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87. The Chahad Bank wants to open a new branch in a distance city with very different economic conditions. Currently, the bank has an expected return of 15% with a standard deviation of 7%. The new branch is expected to have a return of 20% with a standard deviation of 10%. The correlation between the bank and the new branch is -.3. The new branch is expected to be 10% of the bank’s revenues. What is the standard deviation of this bank if they add the new branch? (Round your answer to the nearest .1%)
A) 36.9% B) 6.1% C) 50.3% D) 7.1% E) 6.7% |
B) 6.1%
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88. The Boyer Bank wants to add a new ATM machine in a busy mall. They know the new machine will cost $60,000 with another $30,000 to install it and the necessary security measures in the mall. They expect to save $.27 per transaction and generate 100,000 per year. They expect the new machine to last 8 years. If they need to earn a 12% return what is the NPV of this project? (Round your answer to the nearest $1000)
A) $126,000 B) $44,000 C) $134,000 D) $27,000 E) $117,000 |
B) $44,000
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89. The Boyer Bank wants to add a new ATM machine in a busy mall. They know the new machine will cost $60,000 with another $30,000 to install it and the necessary security measures in the mall. They expect to save $.27 per transaction and generate 100,000 per year. They expect the new machine to last 8 years. What is the expected rate of return or internal rate or return of this project? (Round your answer to the nearest .1%)
A) 25% B) 3.3% C) 30% D) 12% E) 2.4% |
A) 25%
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90. A group of six investors wants to open a new bank. In their application to the Comptroller of the Currency, they discuss that the community they want to do business in has a median income of $55,000, that there are approximately 75,000 homes in the community and that there is approximately $5.6 million in sales generated in the community on any given day. Which decision factor for seeking a new charter are the investors discussing?
A) The level of economic activity in the community B) The growth of economic activity in the community C) The need for a new financial firm D) The strength and character of the local competition E) None of the above |
A) The level of economic activity in the community
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91. A group of six investors wants to open a new bank. In their application to the Comptroller of the Currency, they discuss that new housing starts in the area are up 19% from a year ago with an additional 25 families moving into the community every month. School enrollment has also increased 14% from the previous year. Which decision factor for seeking a new charter are the investors discussing?
A) The level of economic activity in the community B) The growth of economic activity in the community C) The need for a new financial firm D) The strength and character of the local competition E) None of the above |
B) The growth of economic activity in the community
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92. A group of six investors want to open a new bank. In their application to the Comptroller of the Currency, they discuss that the population per banking office is up to 6,000. In addition, growth in the community is to the west of town and there is only one bank serving that part of the community and a new housing subdivision has just started in this part of town that should include 350 new homes. Which decision factor for seeking a new charter are the investors discussing?
A) The level of economic activity in the community B) The growth of economic activity in the community C) The need for a new financial firm D) The strength and character of the local competition E) None of the above |
C) The need for a new financial firm
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93. A group of six investors wants to open a new bank. In their application to the Comptroller of the Currency, they discuss that there are six banks already in the community and that the largest of these has just acquired one of the smaller banks. These six banks do a moderate amount of advertising in the community. There is also one credit union that has one office and a savings bank that has two branches on the east side of town. Growth in the community is to the west. Which decision factor for seeking a new charter are the investors discussing?
A) The level of economic activity in the community B) The growth of economic activity in the community C) The need for a new financial firm D) The strength and character of the local competition E) None of the above |
D) The strength and character of the local competition
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94. A group of six investors wants to open a new bank in the community of Edmond, Oklahoma. They have submitted their application to the Comptroller of the Currency. What type of bank would they be if their application is approved?
A) A state, member bank B) A state, insured bank C) A national bank D) A national bank without FDIC insurance E) None of the above |
C) A national bank
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95. The Cassil National Bank charges their customers $.50 per transaction for using the ATM machine if their deposit balance is below $500. They charge $.25 per transaction for using the ATM if their deposit balance is between $500 and $1000. If their customer’s deposit balance is over $1000, there is no charge for using the ATM machine. This is an example of:
A) An interchange fee B) An independent pricing schedule C) A conditional pricing schedule D) A surcharge fee E) None of the above |
C) A conditional pricing schedule
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96. Which of the following would not be a telephone service a customer could get from a bank call center?
A) The current balance on their account B) A fax copy of a loan application for the bank C) A Verification of what transactions have passed through the account D) Access to their safety deposit box E) All of the above are telephone services a customer could get from a bank call center |
D) Access to their safety deposit box
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97. What categories do authentication factors generally fall in?
A) Something a customer knows B) Something a customer has C) Something a customer is D) All of the above E) None of the above |
D) All of the above
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98. The Jones State Bank is thinking about adding a branch office on the west side of Edmond, Oklahoma. Growth of new homes in the area has averaged 15% per year over the last five years and is expected to continue at that rate in the future. Which factor would this address when considering whether to add a new branch?
A) Traffic count B) Number of retail shops C) Average age of the local population D) Population Density E) Population Growth |
E) Population Growth
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99. The Jones State Bank is thinking about adding a branch office on the west side of Edmond, Oklahoma. Jones State Bank has done a study and found that the site where they want to build sees 35,000 cars pass in an average day. Which factor would this address when considering whether to add a new branch?
A) Traffic count B) Number of retail shops C) Average age of the local population D) Population Density E) Population Growth |
A) Traffic count
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100. The Jones State Bank is thinking about adding a branch office on the west side of Edmond, Oklahoma. Jones State Bank has discovered that area surrounding the proposed site averages 4 houses per acre and has several subdivisions that each have 300 to 400 homes. Which factor would this address when considering whether to add a new branch?
A) Traffic count B) Number of retail shops C) Average age of the local population D) Population Density E) Population Growth |
D) Population Density
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101. The Jones State Bank is thinking about adding a branch office on the west side of Edmond, Oklahoma. Jones State Bank has done a survey of local residents near the area where they want to build and has discovered that most residents are in their 50’s and 60’s. Which factor would this address when considering whether to add a new branch?
A) Traffic count B) Number of retail shops C) Average age of the local population D) Population Density E) Population Growth |
C) Average age of the local population
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102. The Fred National Bank is thinking about adding a branch office on the west side of town. The Fred National Bank has done a survey and has discovered that the mean household income in the area is $76,000 per year. Which factor would this address when considering to add a new branch?
A) Number of retail shops B) Average income level of households C) Ratio of population to branches D) Number of service facilities operated by financial service competitors E) Population density |
B) Average income level of households
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103. The First State Bank is proposing to acquire The Second National Bank, to form The First State MegaBank, which will be a state member bank (a member of the Federal Reserve System) and carry federal deposit insurance. Which regulatory agency must approve the merger?
A) Office of the Comptroller of the Currency B) Federal Deposit Insurance Corporation C) The state banking board D) Federal Reserve E) U.S. Treasury |
D) Federal Reserve
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104. The First National Bank is proposing to take over The Second State Bank, to form The First National MegaBank, which will be a national bank. Which regulatory agency must approve the merger?
A) Office of the Comptroller of the Currency B) Federal Deposit Insurance Corporation C) The state banking board D) Federal Reserve E) U.S. Treasury |
A) Office of the Comptroller of the Currency
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105. Which of the following is not an advantage of ATMs?
A) A limited commitment of resources B) Lower cost per transaction C) Personalized service D) Lower staffing needs E) Geographic accessibility |
A) A limited commitment of resources
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51. Bank assets fall into each of the following categories except:
A) Loans. B) Investment securities. C) Demand deposits. D) Noninterest cash and due from banks. E) Other assets. |
C) Demand deposits
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52. Banks generate their largest portion of income from:
A) Loans. B) Short-term investment. C) Demand deposits. D) Long-term investments. E) Certificates of deposit |
A) Loans.
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53. Loans typically fall into each of the following categories except:
A) Real estate. B) Consumer. C) Commercial and Industrial (business). D) Agricultural. E) Municipal. |
E) Municipal.
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54. Which of the following adjustments are made to gross loans and leases to obtain net loans and leases?
A) The loan and lease loss allowance is subtracted from gross loans B) Unearned income is subtracted from gross interest received C) Investment income is added to gross interest received D) A and B. E) A. and C. |
D) A and B.
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55. An example of a contra-asset account is:
A) The loan and lease loss allowance. B) Unearned income. C) Buildings and equipment. D) Revenue bonds. E) The provision for loan loss. |
A) The loan and lease loss allowance.
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56. The noncash expense item on a bank's Report of Income designed to shelter a bank's current earnings from taxes and to help prepare for bad loans is called:
A) Short-term debt interest B) Noninterest expense C) Provision for taxes D) Provision for possible loan losses E) None of the above. |
D) Provision for possible loan losses
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57. A financial institution's bad-debt reserve, as reported on its balance sheet, is called:
A) Unearned income or discount B) Allowance for possible loan losses C) Intangible assets D) Customer liability on acceptances E) None of the above |
B) Allowance for possible loan losses
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58. When a bank serves as a security dealer for certain kinds of securities (mainly federal, state, and local government obligations) the value of these securities is usually recorded in what account on a bank's Report of Condition?
A) Investment Securities B) Taxable and Tax-Exempt Securities C) Trading Account Securities D) Secondary Reserves E) None of the above |
C) Trading Account Securities
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59. The difference between noninterest income and noninterest expenses on a bank's Report of Income is called:
A) Net Profit Margin B) Net Interest Income C) Net Income After Provision for Possible Loan Losses D) Income or Loss Before Income Taxes E) Net Noninterest Income |
E) Net Noninterest Income
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60. The account that is built up by annual noncash expense deductions and is subtracted from Gross Loans on the Report of Condition is:
A) Unearned income B) Nonperforming loans C) Allocated loan risk deductions D) Allowance for possible loan losses E) None of the above. |
D) Allowance for possible loan losses
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61. Nonperforming loans are credits on which any scheduled loan repayments and interest payments are past due for more than:
A) 30 days B) 60 days C) 90 days D) 180 days E) None of the above |
C) 90 days
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62. One-time only transactions that often involve financial assets or real property pledged as collateral behind a loan and upon which the bank has foreclosed affect a bank's account known as:
A) Allowance for loan losses B) Nonrecurring sales of assets C) Asset gains or losses D) Provision for loan and security losses E) None of the above. |
B) Nonrecurring sales of assets
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63. The use of fixed assets, rather than financial assets, in order to increase earnings flowing to a bank's stockholders is known as:
A) Plant and equipment investment B) Financial leverage C) Operating leverage D) Nondeposit capital E) None of the above |
C) Operating leverage
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64. Banks depend heavily upon borrowed funds supplied by customers with little owners' capital invested. This means that banks make heavy use of:
A) Financial leverage B) Capital restructuring C) Operating Leverage D) Margin borrowing E) None of the above. |
A) Financial leverage
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65. When a loan is considered uncollectible, the bank's accounting department will write (charge) it off the books by reducing the ______ and the accounts. Which choice below correctly fills in the blank in the preceding sentence?
A) PLL and Gross Loans B) ALL and Net Loans C) ALL and Gross Loans D) PLL and Net Loans E) None of the above. |
C) ALL and Gross Loans
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66. The common banking practice of selling those investment securities that have appreciated in order to reap a capital gain and holding onto those securities whose prices have declined is known as:
A) Gains trading B) Performance banking C) Loss control trading D) Selective portfolio management E) None of the above. |
A) Gains trading
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67. Noninterest revenue sources for a bank are called:
A) Commitment fees on loans B) Fee income C) Supplemental income D) Noninterest margin E) None of the above. |
B) Fee income
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68. Large U.S. banks must use which of the methods listed below to determine their provision for loan loss expense?
A) Experience method B) Reserve method C) Specific charge-off method D) Historical cost method E) None of the above. |
C) Specific charge-off method
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69. A bank's temporary lending of excess reserves to other banks is labeled on the balance sheet as:
A) Fed Funds Purchased B) Fed Funds Sold C) Money Market Deposits D) Securities Purchased for Resale E) None of the above |
B) Fed Funds Sold
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70. A bank sells shares of its common stock with a par value of $100 for $200 in the market. Which two accounts on the bank's balance sheet are going to be affected?
A) Retained earnings and capital surplus accounts B) Subordinated notes and debentures and commons stock outstanding accounts C) Retained earnings and common stock outstanding accounts D) Common stock outstanding and capital surplus accounts E) Only the common stock outstanding account is affected |
D) Common stock outstanding and capital surplus accounts
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71. A type of letter of credit which is widely used in international trade is known as:
A) Banker's acceptance B) Commercial paper C) Repurchase agreement D) Fed funds purchased E) None of the above |
A) Banker's acceptance
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72. A bank which starts with ALL of $1.48 million at the beginning of the year, charges off worthless loans of $.94 million during the year, recovers $.12 million on loans previously charged off and charges current income for a $1.02 million provision for loan losses will have an ALL at the end of the year of:
A) $.66 million B) $3.32 million C) $1.68 million D) $1.28 million E) The same amount as at the beginning of the year |
C) $1.68 million
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73. A bank that has total interest income of $67 million and total noninterest income of $14 million. This bank has total interest expenses of $35 million and total noninterest expenses (excluding PLL) of $28 million. Its provision for loan losses is $6 million and its taxes are $5. What is this bank's net interest income?
A) $7 B) -$14 C) $18 D) $32 E) None of the above |
D) $32
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74. A bank that has total interest income of $67 million and total noninterest income of $14 million. This bank has total interest expenses of $35 million and total noninterest expenses (excluding PLL) of $28 million. Its provision for loan losses is $6 million and its taxes are $5. What is this bank's net noninterest income?
A) $7 B) -$14 C) $18 D) $32 E) None of the above |
B) -$14
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75. A bank that has total interest income of $67 million and total noninterest income of $14 million. This bank has total interest expenses of $35 million and total noninterest expenses (excluding PLL) of $28 million. Its provision for loan losses is $6 million and its taxes are $5. What is this bank's net income?
A) $7 B) -$14 C) $18 D) $32 E) None of the above |
A) $7
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76. Which of the following financial statements shows the revenues and expense of a bank over a set period of time?
A) The statement of stockholders equity B) The funds-flow statement C) The report of financial condition D) The report of income E) None of the above |
D) The report of income
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77. Which of the following accounts is sometimes called the bank's primary reserves?
A) Cash and deposits due from bank B) Investment securities C) Trading account securities D) Fed funds sold E) None of the above |
A) Cash and deposits due from bank
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78. Which of the following assets is the largest asset item on the bank's balance sheet?
A) Securities B) Cash C) Loans D) Bank Premises E) None of the above |
C) Loans
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79. What financial service industry category is second to the banking industry in total assets held:
A) Mutual funds B) Thrifts C) Investment banks D) Insurance companies E) Pension funds |
A) Mutual funds
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80. FASB Rule 115 focuses primarily on bank:
A) Deposit sources B) Investments in marketable securities C) Derivatives trading D) Loan-loss reserves E) Federal funds |
B) Investments in marketable securities
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81. Which of the following most accurately describes the principal type(s) of bank noninterest income:
A) Fees from fiduciary transactions B) Fees from deposit transactions C) Fees from securities transactions D) Fees from additional noninterest income E) All of the above |
E) All of the above
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82. Fee income arising from fiduciary transactions include all of the following except:
A) Checking account maintenance fees B) Fees for managing and protecting a customer’s property C) Fees for recordkeeping for corporate security D) Fees for dispersing interest and dividend payments for a corporation E) Fees for managing corporate and individual retirement plans |
A) Checking account maintenance fees
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83. You know the following information about the Miller State Bank:
Gross Loans $300 Miscellaneous Assets $50 Deposits $390 Total Equity $50 Common Stock Par $5 Non-Deposit Borrowings $60 Investment Securities $150 Net Premises $40 Surplus $5 Allowance for Loan Losses $50 Deposits $390 Total Assets $500 Gross Premises $70 Given this information, what is this firm’s Net Loans? A) $250 B) $350 C) $500 D) $50 E) $150 |
A) $250
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84. You know the following information about the Miller State Bank
Gross Loans $300 Miscellaneous Assets $50 Deposits $390 Total Equity $50 Common Stock Par $5 Non-Deposit Borrowings $60 Investment Securities $150 Net Premises $40 Surplus $5 Allowance for Loan Losses $50 Deposits $390 Total Assets $500 Gross Premises $70 Given this information, what is this firm’s Depreciation? A) $250 B) $30 C) $70 D) $40 E) $110 |
B) $30
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85. You know the following information about the Miller State Bank
Gross Loans $300 Miscellaneous Assets $50 Deposits $390 Total Equity $50 Common Stock Par $5 Non-Deposit Borrowings $60 Investment Securities $150 Net Premises $40 Surplus $5 Allowance for Loan Losses $50 Deposits $390 Total Assets $500 Gross Premises $70 Given this information, what is this firm’s Total Liabilities? A) $390 B) $60 C) $450 D) $500 E) $50 |
C) $450
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86. You know the following information about the Miller State Bank
Gross Loans $300 Miscellaneous Assets $50 Deposits $390 Total Equity $50 Common Stock Par $5 Non-Deposit Borrowings $60 Investment Securities $150 Net Premises $40 Surplus $5 Allowance for Loan Losses $50 Deposits $390 Total Assets $500 Gross Premises $70 Given this information, what is this firm’s Undivided Profits? A) $50 B) $5 C) $10 D) $40 E) $450 |
D) $40
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87. You know the following information about the Miller State Bank
Gross Loans $300 Miscellaneous Assets $50 Deposits $390 Total Equity $50 Common Stock Par $5 Non-Deposit Borrowings $60 Investment Securities $150 Net Premises $40 Surplus $5 Allowance for Loan Losses $50 Deposits $390 Total Assets $500 Gross Premises $70 Given this information, what is this firm’s Total Liabilities Plus Equity? A) $250 B) $450 C) $150 D) $50 E) $500 |
E) $500
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88. You know the following information about the Davis National Bank
Total Interest Expenses ($500) Total Non Interest Income $100 Securities Gains (Losses) $ 50 Income Taxes ($ 80) Dividends to Stockholders ($ 40) Total Interest Income $800 Total Non Interest Expenses ($150) Provision for Loan Losses ($100) Given this information, what is this firm’s Net Interest Income? A) $300 B) $150 C) ($50) D) $120 E) $80 |
A) $300
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89. You know the following information about the Davis National Bank
Total Interest Expenses ($500) Total Non Interest Income $100 Securities Gains (Losses) $ 50 Income Taxes ($ 80) Dividends to Stockholders ($ 40) Total Interest Income $800 Total Non Interest Expenses ($150) Provision for Loan Losses ($100) Given this information, what is this firm’s Net Non Interest Income? A) $300 B) $150 C) ($50) D) $120 E) $80 |
C) ($50)
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90. You know the following information about the Davis National Bank
Total Interest Expenses ($500) Total Non Interest Income $100 Securities Gains (Losses) $ 50 Income Taxes ($ 80) Dividends to Stockholders ($ 40) Total Interest Income $800 Total Non Interest Expenses ($150) Provision for Loan Losses ($100) Given this information, what is this firm’s Pretax Net Operating Income (or Net Income before Extraordinary Items)? A) $300 B) $150 C) ($50) D) $120 E) $80 |
B) $150
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91. You know the following information about the Davis National Bank
Total Interest Expenses ($500) Total Non Interest Income $100 Securities Gains (Losses) $ 50 Income Taxes ($ 80) Dividends to Stockholders ($ 40) Total Interest Income $800 Total Non Interest Expenses ($150) Provision for Loan Losses ($100) Given this information, what is this firm’s Net Income? A) $300 B) $150 C) ($50) D) $120 E) $80 |
D) $120
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92. You know the following information about the Davis National Bank
Total Interest Expenses ($500) Total Non Interest Income $100 Securities Gains (Losses) $ 50 Income Taxes ($ 80) Dividends to Stockholders ($ 40) Total Interest Income $800 Total Non Interest Expenses ($150) Provision for Loan Losses ($100) Given this information, what is this firm’s Increase in Undivided Profits? A) $300 B) $150 C) ($50) D) $120 E) $80 |
E) $80
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93. You know the following information about the Davis National Bank
Total Interest Expenses ($500) Total Non Interest Income $100 Securities Gains (Losses) $ 50 Income Taxes ($ 80) Dividends to Stockholders ($ 40) Total Interest Income $800 Total Non Interest Expenses ($150) Provision for Loan Losses ($100) Given this information, what is this firm’s Total Revenues? A) $800 B) $850 C) $150 D) $950 |
D) $950
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94. You know the following information about the Webb State Bank
Accumulated Depreciation $40 Net Loans $600 Fed Funds Purchased and Repurchase Agreements $200 Cash and Due from Banks $50 Trading Account Securities $40 Miscellaneous Assets $100 Deposits $500 Undivided Profits $140 Gross Premises $90 Surplus $40 Subordinated Debt $100 Investment Securities $160 Common Stock Par $20 Gross Loans $700 Given this information, what is this firm’s Allowance for Loan Losses? A) $1300 B) $1000 C) $50 D) $200 E) $100 |
E) $100
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96. You know the following information about the Webb State Bank
Accumulated Depreciation $40 Net Loans $600 Fed Funds Purchased and Repurchase Agreements $200 Cash and Due from Banks $50 Trading Account Securities $40 Miscellaneous Assets $100 Deposits $500 Undivided Profits $140 Gross Premises $90 Surplus $40 Subordinated Debt $100 Investment Securities $160 Common Stock Par $20 Gross Loans $700 Given this information, what is this firm’s Total Non Deposit Borrowings? A) $1000 B) $300 C) $800 D) $200 E) $500 |
B) $300
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97. You know the following information about the Webb State Bank
Accumulated Depreciation $40 Net Loans $600 Fed Funds Purchased and Repurchase Agreements $200 Cash and Due from Banks $50 Trading Account Securities $40 Miscellaneous Assets $100 Deposits $500 Undivided Profits $140 Gross Premises $90 Surplus $40 Subordinated Debt $100 Investment Securities $160 Common Stock Par $20 Gross Loans $700 Given this information, what is this firm’s Total Liabilities? A) $1000 B) $300 C) $800 D) $200 E) $500 |
C) $800
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98. You know the following information about the Webb State Bank
Accumulated Depreciation $40 Net Loans $600 Fed Funds Purchased and Repurchase Agreements $200 Cash and Due from Banks $50 Trading Account Securities $40 Miscellaneous Assets $100 Deposits $500 Undivided Profits $140 Gross Premises $90 Surplus $40 Subordinated Debt $100 Investment Securities $160 Common Stock Par $20 Gross Loans $700 Given this information, what is this firm’s Total Equity? A) $1000 B) $300 C) $800 D) $200 E) $500 |
D) $200
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99. You know the following information about the Webb State Bank
Accumulated Depreciation $40 Net Loans $600 Fed Funds Purchased and Repurchase Agreements $200 Cash and Due from Banks $50 Trading Account Securities $40 Miscellaneous Assets $100 Deposits $500 Undivided Profits $140 Gross Premises $90 Surplus $40 Subordinated Debt $100 Investment Securities $160 Common Stock Par $20 Gross Loans $700 Given this information, what is this firm’s Total Assets? A) $1000 B) $300 C) $800 D) $200 E) $500 |
A) $1000
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100. You know the following information about the Taylor National Bank
Provision for Loan Losses ($100) Income Taxes ($140) Non Interest Income $500 Dividends ($60) Securities Gains (Losses) ($50) Interest Income $1500 Non Interest Expense $750 Interest Expenses $750 Given this information, what is this firm’s Net Interest Income? A) $150 B) $210 C) $400 D) ($250) E) $750 |
E) $750
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95. You know the following information about the Webb State Bank
Accumulated Depreciation $40 Net Loans $600 Fed Funds Purchased and Repurchase Agreements $200 Cash and Due from Banks $50 Trading Account Securities $40 Miscellaneous Assets $100 Deposits $500 Undivided Profits $140 Gross Premises $90 Surplus $40 Subordinated Debt $100 Investment Securities $160 Common Stock Par $20 Gross Loans $700 Given this information, what is this firm’s Net Premises? A) $130 B) $1000 C) $50 D) $200 E) $100 |
C) $50
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101. You know the following information about the Taylor National Bank
Provision for Loan Losses ($100) Income Taxes ($140) Non Interest Income $500 Dividends ($60) Securities Gains (Losses) ($50) Interest Income $1500 Non Interest Expense $750 Interest Expenses $750 Given this information, what is this firm’s Net Non Interest Income? A) $150 B) $210 C) $400 D) ($250) E) $750 |
D) ($250)
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102. You know the following information about the Taylor National Bank
Provision for Loan Losses ($100) Income Taxes ($140) Non Interest Income $500 Dividends ($60) Securities Gains (Losses) ($50) Interest Income $1500 Non Interest Expense $750 Interest Expenses $750 Given this information, what is this firm’s Net Operating Income or Net Income Before Extraordinary Income? A) $150 B) $210 C) $400 D) ($250) E) $750 |
C) $400
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103. You know the following information about the Taylor National Bank
Provision for Loan Losses ($100) Income Taxes ($140) Non Interest Income $500 Dividends ($60) Securities Gains (Losses) ($50) Interest Income $1500 Non Interest Expense $750 Interest Expenses $750 Given this information, what is this firm’s Net Income? A) $150 B) $210 C) $400 D) ($250) E) $750 |
B) $210
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104. You know the following information about the Taylor National Bank
Provision for Loan Losses ($100) Income Taxes ($140) Non Interest Income $500 Dividends ($60) Securities Gains (Losses) ($50) Interest Income $1500 Non Interest Expense $750 Interest Expenses $750 Given this information, what is this firm’s Increase in Undivided Profits? A) $150 B) $210 C) $400 D) ($250) E) $750 |
A) $150
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105. You know the following information about the Taylor National Bank
Provision for Loan Losses ($100) Income Taxes ($140) Non Interest Income $500 Dividends ($60) Securities Gains (Losses) ($50) Interest Income $1500 Non Interest Expense $750 Interest Expenses $750 Given this information, what is this firm’s Total Revenues? A) $1500 B) $2000 C) $2050 D) $1950 E) $1450 |
B) $2000
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