Banking and Financial Services Test Preparation https://quizplus.com/study-set/3307 26 Chapters 2183 Verified Questions
Banking and Financial Services Test Preparation Course Introduction This course offers a comprehensive introduction to the structure, functions, and operations of banking and financial services in the modern economy. Students will explore the roles of commercial banks, non-bank financial institutions, and the regulatory environment in which they operate. Key topics include deposit mobilization, loan and credit provisioning, risk management, electronic banking, payment systems, and the evolution of fintech. By blending theoretical foundations with real-world case studies, the course equips students with essential knowledge to understand how financial services support individuals, businesses, and economic development.
Recommended Textbook Financial Markets and Institutions 7th Edition by Frederic S. Mishkin
Available Study Resources on Quizplus 26 Chapters 2183 Verified Questions 2183 Flashcards Source URL: https://quizplus.com/study-set/3307
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Chapter 1: Why Study Financial Markets and Institutions Available Study Resources on Quizplus for this Chatper 63 Verified Questions 63 Flashcards Source URL: https://quizplus.com/quiz/65642
Sample Questions Q1) The organization responsible for the conduct of monetary policy in the United States is the A)Comptroller of the Currency. B)U)S. Treasury. C)Federal Reserve System. D)Bureau of Monetary Affairs. Answer: C Q2) The bond markets are important because A)they are easily the most widely followed financial markets in the United States. B)they are the markets where interest rates are determined. C)they are the markets where foreign exchange rates are determined. D)all of the above. Answer: B Q3) The government organization responsible for the conduct of monetary policy in the United States is the U.S. Treasury. A)True B)False Answer: False To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Overview of the Financial System Available Study Resources on Quizplus for this Chatper 80 Verified Questions 80 Flashcards Source URL: https://quizplus.com/quiz/65631
Sample Questions Q1) Through risk-sharing activities, a financial intermediary ________ its own risk and ________ the risks of its customers. A)reduces; increases B)increases; reduces C)reduces; reduces D)increases; increases Answer: B Q2) Which of the following can be described as involving direct finance? A)A corporation's stock is traded in an over-the-counter market. B)People buy shares in a mutual fund. C)A pension fund manager buys commercial paper in the secondary market. D)An insurance company buys shares of common stock in the over-the-counter markets. E)None of the above. Answer: E Q3) American investors pay attention to only the Dow Jones Industrial Average. A)True B)False Answer: False To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: What Do Interest Rates Mean and What Is Their Role in Valuation Available Study Resources on Quizplus for this Chatper 95 Verified Questions 95 Flashcards Source URL: https://quizplus.com/quiz/65623
Sample Questions Q1) Changes in interest rates make investments in long-term bonds risky. A)True B)False Answer: True Q2) Bonds with a maturity that is longer than the holding period have no interest-rate risk. A)True B)False Answer: False Q3) The interest rate that is adjusted for actual changes in the price level is called the A)ex post real interest rate. B)expected interest rate. C)ex ante real interest rate. D)none of the above. Answer: A Q4) Why may a bond's rate of return differ from its yield to maturity? Answer: not answered Q5) What is the purpose of discounting cash flows? Page 5 Answer: not answered To view all questions and flashcards with answers, click on the resource link above.
Chapter 4: Why Do Interest Rates Change Available Study Resources on Quizplus for this Chatper 106 Verified Questions 106 Flashcards Source URL: https://quizplus.com/quiz/65622
Sample Questions Q1) When the price of a bond is ________ the equilibrium price, there is an excess demand for bonds and the price will ________. A)above; rise B)above; fall C)below; fall D)below; rise Q2) When the economy slips into a recession, normally the demand for bonds ________, the supply of bonds ________, and the interest rate ________. A)increases; increases; rises B)decreases; decreases; falls C)increases; decreases; falls D)decreases; increases; rises Q3) When bonds become more widely traded, and as a consequence the market becomes more liquid, the demand curve for bonds shifts to the ________ and the interest rate ________. A)right; rises B)right; falls C)left; falls D)left; rises To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: How Do Risk and Term Structure Affect Interest Rates Available Study Resources on Quizplus for this Chatper 98 Verified Questions 98 Flashcards Source URL: https://quizplus.com/quiz/65621
Sample Questions Q1) ________ cannot explain the empirical fact that interest rates on bonds of different maturities tend to move together. A)The market segmentation theory B)The expectations theory C)The liquidity premium theory D)Both A and B of the above E)Both A and C of the above Q2) When a municipal bond is given tax-free status, the demand for municipal bonds shifts ________, causing the interest rate on the bond to ________. A)leftward; rise B)leftward; fall C)rightward; rise D)rightward; fall Q3) Following the subprime collapse, the spread (difference)between the interest rates on Baa bonds and Treasury bonds widened. A)True B)False Q4) Discuss what is shown by a yield curve. Page 7 Q5) What do credit-rating agencies do and why is this work important? To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Are Financial Markets Efficient Available Study Resources on Quizplus for this Chatper 58 Verified Questions 58 Flashcards Source URL: https://quizplus.com/quiz/65620
Sample Questions Q1) A situation in which the price of an asset differs from its fundamental market value is called A)an unexploited profit opportunity. B)a bubble. C)a correction. D)a mean reversion. Q2) An investor gains from short selling by ________ and then later ________. A)buying a stock; selling it at a higher price B)selling a stock; buying it back at a lower price C)buying a stock; selling it at a lower price D)selling a stock; buying it back at a higher price Q3) Having performed well in the past indicates that an investment adviser or a mutual fund will perform well in the future. A)True B)False Q4) To say that stock prices follow a "random walk" is to argue that A)stock prices rise, then fall. B)stock prices rise, then fall in a predictable fashion. C)stock prices tend to follow trends. D)stock prices are, for all practical purposes, unpredictable. Page 8 To view all questions and flashcards with answers, click on the resource link above.
Chapter 7: Why Do Financial Institutions Exist Available Study Resources on Quizplus for this Chatper 119 Verified Questions 119 Flashcards Source URL: https://quizplus.com/quiz/65619
Sample Questions Q1) The problem of adverse selection helps to explain A)which firms are more likely to obtain funds from banks and other financial intermediaries, rather than from securities markets. B)why collateral is an important feature of consumer, but not business, debt contracts. C)why direct finance is more important than indirect finance as a source of business finance. D)only A and B of the above. Q2) What facts about financial structure can be explained by moral hazard? Q3) Net worth A)is the difference between current assets and current liabilities. B)is the difference between assets and liabilities. C)is total assets divided by total liabilities. D)is total assets plus total liabilities. Q4) A debt contract is more likely to be incentive compatible if A)the company must follow standard accounting principles. B)the funds are provided by a venture capital firm. C)owners of the firm have more of their own money in the business. D)all of the above. E)only B and C. To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Why Do Financial Crises Occur and Why Are They so Damaging to the Economy Available Study Resources on Quizplus for this Chatper 55 Verified Questions 55 Flashcards Source URL: https://quizplus.com/quiz/65618
Sample Questions Q1) In the second stage of a financial crisis in an emerging economy, a speculative currency attack begins. Why can't the government defend itself from such an attack? Q2) In Stage Two of an financial crisis in an emerging economy, speculators engage in massive ________ of a currency if it is fixed against the U.S. dollar. A)sales B)purchases C)either A or B can be correct D)neither A nor B is correct Q3) Discuss the difference in Stage Two of a financial crisis between an advanced economy and an emerging market economy. Q4) What does the "twin crises" in an emerging market financial crisis refer to? A)both the currency crisis and the financial crisis B)both the fiscal crisis and the banking crisis C)both the inflation crisis and the asset bubble crisis D)both the fiscal crisis and political crisis Q5) Discuss some of the financial innovations in mortgage markets that led to the U.S. financial crisis in 2007. Page 10economy financial crisis refer to? Q6) What does the "twin crises" in an emerging To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Central Banks and the Federal Reserve System Available Study Resources on Quizplus for this Chatper 98 Verified Questions 98 Flashcards Source URL: https://quizplus.com/quiz/65617
Sample Questions Q1) The Federal Reserve banks act as liaisons between the business community and the Federal Reserve System. A)True B)False Q2) The unusual structure of the Federal Reserve System is perhaps best explained by A)Americans' fear of centralized power. B)the traditional American distrust of moneyed interests. C)Americans' desire to remove control of the money supply from the U.S. Treasury. D)all of the above. E)only A and B of the above. Q3) The Board of Governors A)establishes, within limits, reserve requirements. B)effectively sets the discount rate. C)sets margin requirements. D)does all of the above. E)does only A and B of the above. Q4) What is the theory of bureaucratic behavior? What types of behavior does it predict the Fed might undertake? Q5) What are the factors that promote the independence of the Federal Reserve? 11 click on the resource link above. To view all questions and flashcards with Page answers,
Chapter 10: Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics Available Study Resources on Quizplus for this Chatper 95 Verified Questions 95 Flashcards Source URL: https://quizplus.com/quiz/65641
Sample Questions Q1) Regulations making it obligatory for depository institutions to keep a certain fraction of their deposits in accounts with the Fed are A)open market operations. B)federal funds rate. C)required reserve ratio. D)reserve requirements. Q2) If the Federal Reserve wants to lower the monetary base and the money supply, it will A)increase bank reserves. B)lower the discount rate. C)sell government securities. D)lower reserve requirements. Q3) When it comes to choosing an operating target, both the ________ rate and ________ aggregates are easily controllable using the Fed's policy tools. A)federal funds; monetary B)federal funds; reserve C)three-month Treasury bill; monetary D)ten-year Treasury bond; reserve Q4) Describe an asset-price bubble.
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Chapter 11: The Money Markets Available Study Resources on Quizplus for this Chatper 76 Verified Questions 76 Flashcards Source URL: https://quizplus.com/quiz/65640
Sample Questions Q1) Money market instruments A)are usually sold in large denominations. B)have low default risk. C)mature in one year or less. D)are characterized by all of the above. E)are characterized by only A and B of the above. Q2) Federal funds are A)usually overnight investments. B)borrowed by banks that have a deficit of reserves. C)lent by banks that have an excess of reserves. D)all of the above. E)only A and B of the above. Q3) Two important characteristics of any financial market are flexibility and A)risk. B)innovation. C)tolerance. D)capital. Q4) Commercial paper has been used in various forms since the 1930s. A)True B)False Page 13 To view all questions and flashcards with answers, click on the resource link above.
Chapter 12: The Bond Market Available Study Resources on Quizplus for this Chatper 88 Verified Questions 88 Flashcards Source URL: https://quizplus.com/quiz/65639
Sample Questions Q1) (I)The primary issuers of capital market securities are financial institutions. (II)The largest purchasers of capital market securities are corporations. A)(I)is true, (II)false. B)(I)is false, (II)true. C)Both are true. D)Both are false. Q2) What is the purpose of the capital market? How do capital market securities differ from money market securities in their general characteristics? Q3) Individuals and households frequently purchase capital market securities through financial institutions such as A)mutual funds. B)pension funds. C)money market mutual funds. D)all of the above. E)only A and B of the above. Q4) What are Treasury STRIPS? Q5) What is a callable bond? How does the callability feature affect the bond's price and interest rate? To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: The Stock Market Available Study Resources on Quizplus for this Chatper 68 Verified Questions 68 Flashcards Source URL: https://quizplus.com/quiz/65638
Sample Questions Q1) Which of the following statements about trading operations in an organized exchange is correct? A)Floor traders all deal in a wide variety of stocks. B)In most trades, specialists match buy and sell orders. C)In most trades, specialists buy for or sell from their own inventories. D)The SuperDOT system is used to expedite large trades of over 100,000 shares. Q2) According to the Gordon growth model, what is an investor's valuation of a stock whose current dividend is $1.00 per year if dividends are expected to grow at a constant rate of 10 percent over a long period of time and the investor's required return is 15 percent? A)$20 B)$11 C)$22 D)$7.33 E)$4.40 Q3) About half of new equity issues are preferred stock. A)True B)False Q4) What are the objectives of the Securities and Exchange Commission? Q5) How do common stocks differ from preferred stocks? Page 15 To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: The Mortgage Markets Available Study Resources on Quizplus for this Chatper 75 Verified Questions 75 Flashcards Source URL: https://quizplus.com/quiz/65637
Sample Questions Q1) Why may Fannie Mae and Freddie Mac pose a threat to the health of the financial system? Q2) Retired people can live on the equity they have in their homes by using a A)GEM. B)GPM. C)SAM. D)RAM. Q3) Which of the following is true of mortgage interest rates? A)Longer-term mortgages have higher interest rates than shorter-term mortgages. B)In exchange for points, lenders reduce interest rates on mortgage loans. C)Mortgage rates are lower than Treasury bond rates because of the tax deductibility of mortgage interest payments. D)All of the above are true. E)Only A and B of the above are true. Q4) The share of the mortgage market held by commercial banks is approximately A)50 percent. B)25 percent. C)15 percent. D)5 percent. Q5) How has the modern mortgage market changed over recent years? Page 16 To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: The Foreign Exchange Market Available Study Resources on Quizplus for this Chatper 85 Verified Questions 85 Flashcards Source URL: https://quizplus.com/quiz/65636
Sample Questions Q1) An increase in the foreign interest rate shifts the expected return schedule for ________ deposits to the ________ and causes the domestic currency to depreciate. A)domestic; right B)domestic; left C)foreign; right D)foreign; left Q2) If the interest rate is 13 percent on euro deposits and 15 percent on dollar deposits, and if the euro is expected to appreciate at a 4 percent rate relative to the dollar, then A)euro deposits have a lower expected return than dollar deposits. B)the expected return on euro deposits in terms of dollars is 9 percent. C)the expected return on dollar deposits in terms of euros is 19 percent. D)both A and B of the above will occur. E)none of the above will occur. Q3) A spot transaction in the foreign exchange market involves the A)exchange of exports and imports at a specified future date. B)exchange of bank deposits at a specified future date. C)immediate (within two days)exchange of exports and imports. D)immediate (within two days)exchange of bank deposits. To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: The International Financial System Available Study Resources on Quizplus for this Chatper 88 Verified Questions 88 Flashcards Source URL: https://quizplus.com/quiz/65635
Sample Questions Q1) The difference between merchandise exports and imports is called the current account balance. A)True B)False Q2) Under a fixed exchange rate regime, if the domestic currency is initially ________, that is ________ par, the central bank must intervene to sell the domestic currency by purchasing foreign assets. A)overvalued; below B)overvalued; above C)undervalued; below D)undervalued; above Q3) Leading up to the foreign exchange crisis of September 1992, the Bank of England wanted to pursue a(n)________ monetary policy and the German Bundesbank wanted to pursue a(n)________ monetary policy. A)expansionary, expansionary B)expansionary; contractionary C)contractionary; expansionary D)contractionary; contractionary Q4) What was the European Monetary System? How did its exchange rate mechanism work? Page 18 To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Banking and the Management of Financial Institutions Available Study Resources on Quizplus for this Chatper 104 Verified Questions 104 Flashcards Source URL: https://quizplus.com/quiz/65634
Sample Questions Q1) For a given return on assets, the lower the bank capital is, A)the lower the return for the owners of the bank will be. B)the higher the return for the owners of the bank will be. C)the lower the credit risk for the owners of the bank will be. D)both A and C of the above will happen. Q2) The share of checkable deposits in total bank liabilities has A)expanded moderately over time. B)expanded dramatically over time. C)shrunk over time. D)remained virtually unchanged since 1960. Q3) Which of the following are not reported as assets on a bank's balance sheet? A)Cash items in the process of collection B)Borrowings C)U)S. Treasury securities D)Reserves Q4) Explain the off-balance-sheet activities banks engage in, the risks they face from undertaking these activities, and the controls they put in place to restrict bank employees from taking on too much risk. Page 19 Q5) What costs do banks hope to avoid by holding excess reserves? Q6) Explain how a capital crunch can lead to a credit crunch in our economy.
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Chapter 18: Financial Regulation Available Study Resources on Quizplus for this Chatper 73 Verified Questions 73 Flashcards Source URL: https://quizplus.com/quiz/65633
Sample Questions Q1) The possibility that the failure of one bank can hasten the failure of other banks is called the A)bank run effect. B)moral hazard effect. C)contagion effect. D)adverse selection effect. Q2) The failure of one bank can hasten the failure of others in what is referred to as a contagion effect. A)True B)False Q3) Which of the following is least likely to accompany financial consolidation and the development of large, complex banking organizations? A)More financial institutions will be considered too big to fail. B)The government safety net will be extended to include nonbanking activities. C)Moral hazard problems will become less important. D)Banks will have greater incentives and opportunities to take on more risk. Q4) Discuss the role of NINJA loans in the 2007-2009 financial crisis. Q5) How has bank regulation in the United States changed since the late 1980s? What accounts for these changes? 21 click on the resource link above. To view all questions and flashcards withPage answers,
Chapter 19: Banking Industry: Structure and Competition Available Study Resources on Quizplus for this Chatper 134 Verified Questions 134 Flashcards Source URL: https://quizplus.com/quiz/65632
Sample Questions Q1) As a result of shared electronic banking facilities, A)barriers to branching have become less burdensome. B)banking has become less competitive. C)both of the above have occurred. D)neither of the above has occurred. Q2) Reserve requirements that force banks to keep a certain fraction of their deposits as reserves and restrictions on the interest rates that can be paid on deposits have been the major forces behind financial innovation. A)True B)False Q3) A major difference between the United States and Japanese banking systems is that A)American banks are allowed to hold substantial equity stakes in commercial firms, whereas Japanese banks cannot. B)Japanese banks are allowed to hold substantial equity stakes in commercial firms, whereas American banks cannot. C)bank holding companies are illegal in the United States. D)both A and C of the above E)both B and C of the above To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 20: The Mutual Fund Industry Available Study Resources on Quizplus for this Chatper 57 Verified Questions 57 Flashcards Source URL: https://quizplus.com/quiz/65630
Sample Questions Q1) Capital appreciation funds select stocks of ________ and tend to be ________ risky than total return funds. A)large, established companies that pay dividends regularly; more B)large, established companies that pay dividends regularly; less C)companies expected to grow rapidly; more D)companies expected to grow rapidly; less Q2) Which of the following is most likely to be a no-load fund? A)value funds B)hedge funds C)growth funds D)index funds Q3) Mutual funds A)pool the resources of many small investors by selling these investors shares and using the proceeds to buy securities. B)allow small investors to obtain the benefits of lower transaction costs in purchasing securities. C)provide small investors a diversified portfolio that reduces risk. D)do all of the above. E)do only A and B of the above. To view all questions and flashcards with answers, click on the resource link above. Page 23
Chapter 21: Insurance Companies and Pension Funds Available Study Resources on Quizplus for this Chatper 79 Verified Questions 79 Flashcards Source URL: https://quizplus.com/quiz/65629
Sample Questions Q1) Why must insurance companies screen applicants so carefully? Q2) Insurance companies' attempts to minimize adverse selection and moral hazard explain which of the following insurance practices? A)requiring collateral for policies B)risk-based premiums C)compensating balances D)all of the above E)only A and B of the above Q3) A basic product of life insurance companies is ________. A)disability insurance B)annuities C)health insurance D)all of the above Q4) Which of the following is not a feature of the Terrorism Risk Insurance Act of 2002? A)Losses that exceed $100 billion are not covered. B)The law does not apply to acts of international terrorism when losses are less than $5 million. C)Government pays 50 percent of losses in excess of $100 billion. D)Government pays 90 percent of the losses. To view all questions and flashcards with answers, click on the resource link above. Page 24
Chapter 22: Investment Banks, Security Brokers and Dealers, and Venture Capital Firms Available Study Resources on Quizplus for this Chatper 84 Verified Questions 84 Flashcards Source URL: https://quizplus.com/quiz/65628
Sample Questions Q1) An investment bank is a financial institution that A)bundles small deposits into larger loans. B)helps corporations raise funds. C)holds most of its assets in commercial paper. D)does all of the above. E)does only A and B of the above. Q2) The buyers of private placement issues are most likely to be ________. A)insurance companies B)pension funds C)investment banks D)all of the above E)only A and B of the above Q3) The buyers of private placement securities are most likely to be ________. A)insurance companies B)pension funds and mutual funds C)commercial banks D)all of the above E)only A and B of the above Q4) What services do investment bankers provide for firms that are issuing new Page 25 securities?
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Chapter 23: Risk Management in Financial Institutions Available Study Resources on Quizplus for this Chatper 63 Verified Questions 63 Flashcards Source URL: https://quizplus.com/quiz/65627
Sample Questions Q1) A bank that wants to monitor the check payment practices of its commercial borrowers, so that moral hazard can be prevented, will require borrowers to A)place a bank officer on their board of directors. B)place a corporate officer on the bank's board of directors. C)keep compensating balances in a checking account at the bank. D)do all of the above. E)do only A and B of the above. Q2) If a bank has ________ rate-sensitive assets than rate-sensitive liabilities, then a(n)________ in interest rates will increase bank profits. A)more; decline B)more; increase C)less; increase D)both A and C Q3) If a bank has more rate-sensitive liabilities than assets, then an increase in interest rates will reduce bank profits. A)True B)False Q4) What is duration gap analysis and why is it important to a bank? To view all questions and flashcards with answers, click on the resource link above. Page 26
Chapter 24: Hedging With Financial Derivatives Available Study Resources on Quizplus for this Chatper 114 Verified Questions 114 Flashcards Source URL: https://quizplus.com/quiz/65626
Sample Questions Q1) When a financial institution hedges the interest-rate risk for a specific asset, the hedge is called a ________. A)macro hedge B)micro hedge C)cross hedge D)futures hedge Q2) Which is not a problem of forward contracts? A)a lack of liquidity B)a lack of flexibility C)the difficulty of finding a counterparty D)default risk Q3) Explain how a swap could be used to reduce interest-rate risk for a bank with more rate-sensitive assets than rate-sensitive liabilities. Q4) A contract that requires the investor to sell securities on a future date is called a ________. A)short contract B)long contract C)hedge D)micro hedge To view all questions and flashcards with answers, click on the resource link above. Page 27
Chapter 25: Savings Associations and Credit Unions Available Study Resources on Quizplus for this Chatper 87 Verified Questions 87 Flashcards Source URL: https://quizplus.com/quiz/65625
Sample Questions Q1) ________ view credit unions as unfair competitors due to government support they receive in the form of tax advantages. A)Regulators B)The Federal Reserve C)Commercial banks D)none of the above Q2) Examples of the huge risks that "zombie S&Ls" undertook include A)building shopping centers in the desert. B)buying manufacturing plants to convert manure to methane. C)purchasing billions of dollars of junk bonds. D)all of the above. E)only A and B of the above. Q3) The mutual form of ownership accentuates the principal-agent problem that exists in corporations. A)True B)False Q4) The second major liability of savings and loans is borrowings. A)True B)False Q5) How has the thrift industry been transformed since FIRREA? Page 28 To view all questions and flashcards with answers, click on the resource link above.
Chapter 26: Finance Companies Available Study Resources on Quizplus for this Chatper 41 Verified Questions 41 Flashcards Source URL: https://quizplus.com/quiz/65624
Sample Questions Q1) Commercial paper is an important source of funding for finance companies. As presented in the Consolidated Finance Company Balance Sheet, commercial paper represents about ________ of their liabilities. A)3.9% B)5.8% C)12.5% D)20.0% Q2) Lease financing is an example of a business financing need not served by most banks. A)True B)False Q3) What factors explain the existence of finance companies, given that banks already provide loans, credit, and so forth? Q4) Discuss the regulatory environment for finance companies relative to commercial banks. Q5) Much like banking institutions, interest-rate risk is a big concern for finance companies. A)True B)False 29 click on the resource link above. To view all questions and flashcards withPage answers,