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MCQ 464
MCQ 464
1 INCORRECT
Which of the following would be a demand for liquid funds for a bank? A) B) C) A deposit into a savings account by Jim Roy A dividend payment to the stockholders of Holiday Bank The sale of a group of automobile loans to an insurance company
D)The final payment on a home mortgage by Fred Sullivan All of the above are demands for liquid funds
E)
2 INCORRECT
The Double Trouble State Bank has incoming deposits of $2000, revenues from nondeposit services of $200, customer loan repayments of $1000, the sale of assets of $500 and borrowings from the money market of $2000. At the same time they had deposit withdrawals of $1500, acceptable loan requests of $1200, repayments of borrowings for the bank of $1000 and other operating expenses of $500. What is the net liquidity position of this bank? A) B) C) This bank has a liquidity surplus of $1500 This bank has a liquidity deficit of $1500 This bank has a liquidity surplus of $3500
E)
3 INCORRECT
According to the textbook, when is there a greater demand for liquid funds? A) B) During the spring when people have to pay taxes During the winter when people have to purchase new coats
During the fall and summer corresponding to school, holidays and C) travel plans D)During the spring when people work in their gardens more
E)
4 INCORRECT
Which of the following would be considered a liquid asset? A) B) C) A Treasury Bill with 45 days to maturity A municipal bond with 5 years to maturity A federal agency security with 90 days to maturity
E)
5 INCORRECT
Which of the following would be an example of borrowing liquidity? Lending the reserves held by the bank at the Federal Reserve to A) another bank B) C) Borrowing the reserves held at the Federal Reserve of another bank Purchasing a Treasury Bill with 90 days to maturity
E)
6 INCORRECT
The fact that liquidity rises as deposits increase and loans decrease and that liquidity falls when deposits decrease and loans rise is the basis for: A) B) C) The sources and uses of funds approach The structure of funds approach The liquidity indicator approach
E)
7 INCORRECT
When a bank examines the loss sales of assets and the banks ability to meet commitments to credit customers this forms the basis for:
A) B) C)
The sources and uses of funds approach The structure of funds approach The liquidity indicator approach
E)
8 INCORRECT
Which of the following would be part of legal reserves for a bank? A) B) C) U.S. Treasury Bills Short Term Government Agency Securities Deposits held in Reserve Accounts at the Federal Reserve
E)
9 CORRECT
The Reserve Maintenance Period for a bank begins how many days after the beginning of the Reserve Computation Period? A) B) C) 14 days 15 days 30 days
E)
10 INCORRECT
Which of the following is a factor to consider when deciding on which source of liquid funds the bank should use? A) B) The duration of the need Access to the market for liquid funds
C)
E)
Chapter 10
The correct answer for each question is indicated by a .
1 INCORRECT
Federal Regulators require institutions to develop a written investment policy that includes: A) B) Guideline on how many of the loans can serve as collateral Guidelines on the degree of speculative potential of the investments
Guidelines on the degree of default risk exposure the institution is C) willing to accept D)Guidelines on the profit potential of all investments All of the above
E)
2 INCORRECT
Some authorities refer to investments as: A) B) C) The cash account The crossroads account The end of the line account
E)
3 INCORRECT
Short term securities supported by the taxing power of the federal government are: A) Treasury Bills
B) C)
E)
4 INCORRECT
Interest bearing receipts for deposits of funds in a financial institution are: A) B) C) Treasury Bills Federal Agency Securities Short Term Municipal Obligations
E)
5 INCORRECT
The Seaside National Bank is thinking about purchasing a bond that has an 8 percent coupon rate with 15 years to maturity. This bond has a face value of $1000 and is selling in the market for $1141. What is the yield to maturity on this bond? A) B) C) 8 percent 15 percent 6.5 percent
E)
6 INCORRECT
The Seaside National Bank is thinking about purchasing a bond that has an 8 percent coupon rate with 15 years to maturity. This bond has a face value of $1000 and is selling in the market for $1141. The Seaside National bank expects to hold this bond for 9 years and thinks they can sell it at the end of 9 years for $1209. What is the holding period return for this bond? A) 8 percent
B) C)
E)
7 INCORRECT
A municipal bond has a yield to maturity of 7 percent, while a corporate bond with equivalent default risk and time to maturity has a yield to maturity of 9.21 percent? At what tax rate would these bonds have the same after tax yield? A) B) C) 24 percent tax rate 31.6 percent tax rate 50 percent tax rate
E)
8 INCORRECT
The risk that has to do with the breadth and depth of the secondary market is: A) B) C) Interest rate risk Business risk Liquidity risk
E)
9 CORRECT
The risk that has to do with the falling sales and rising unemployment in the local area is: A) B) Interest rate risk Business risk
C)
Liquidity risk
E)
10 INCORRECT
The risk that loans will be terminated or paid off ahead of schedule because they will be refinanced or because of turnover of assets used to back the loans is: A) B) C) Interest rate risk Business risk Liquidity risk
E)
Chapter9
The correct answer for each question is indicated by a .
1 INCORRECT
What process requires a bank to set aside a group of income earning assets, such as home mortgages, and then sell securities against those assets in the open market? A) B) C) Securitization Credit enhancement Sale of loans
E)
2 INCORRECT
An investor in securities backed by loans can receive protection against default through the use of:
A) B) C)
E)
3 CORRECT
An independent party appointed to make sure the issuer of securitized assets fulfills all of their obligations is called: A) B) C) A credit enhancement A liquidity enhancement A trustee
E)
4 INCORRECT
The issuer of loans pooled and securitized is often: A) B) C) A credit enhancement A liquidity enhancement A trustee
E)
5 INCORRECT
Pooling of loans through securitization helps: A) B) Diversify a lenders credit risk exposure Reduce the need to monitor each individual loans payment stream
C)
D)Transforms illiquid assets into new sources of funds for lenders All of the above
E)
6 CORRECT
Which government sponsored enterprise creates its own mortgage backed securities? A) B) C) Government National Mortgage Association Federal National Mortgage Association Student Loan Marketing Association
E)
7 INCORRECT
When the seller of a loan keeps the ability to collect interest and principal payments on a loan they are: A) B) C) issuing credit enhancements issuing liquidity enhancements retaining the servicing rights
E)
8 INCORRECT
When the purchaser of a loan is effectively receiving a put option with the purchase of the loan: A) B) C) The loan is being sold as is The loan is being sold with rebound The loan is being sold with course correction The loan is being sold with recourse
E)
9 CORRECT
What type of obligation is a standby letter of credit? A) B) C) It is a moral obligation It is a contingent obligation It is an independent obligation
E)
10 INCORRECT
The Fred Jones Company can issued $1,000,000 in commercial paper on its own with an interest rate of 5.75 percent. If it gets an SLC from the Hardy Bank, it can issue commercial paper with a rate of 5.15 percent. The Hardy bank will charge the Fred Jones Company $7500 for the SLC. Should the Fred Jones Company get the SLC? Yes, because the price of the SLC is lower than their savings from the A) lower interest rate B) Yes, because it is the right thing to do
No, because the price of the SLC is higher than their savings from the C) lower interest rate D)No, because SLCs are immoral Cannot be determined from the above information
E)