Business Process Management
Textbook Exam Questions
Course Introduction
Business Process Management (BPM) explores the systematic approach to improving an organizations business processes in order to achieve more efficient results and higher performance. The course covers core BPM concepts, methodologies, and frameworks for analyzing, modeling, optimizing, and automating business processes. Students learn how to identify process inefficiencies, apply mapping techniques, and utilize BPM technologies to enhance productivity and agility. Through case studies and practical exercises, the course highlights the strategic importance of BPM in driving business innovation, ensuring compliance, and supporting digital transformation initiatives.
Recommended Textbook Management Information Systems Managing the Digital Firm 6th Canadian Edition by Kenneth
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Chapter 1: Why Study Money, banking, and Financial Markets
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Sample Questions
Q1) What crucial role do financial intermediaries perform in an economy?
Answer: Financial intermediaries borrow funds from people who have saved and make loans to other individuals and businesses and thus improve the efficiency of the economy.
Q2) The bond markets are important because they are
A)easily the most widely followed financial markets in the United States.
B)the markets where foreign exchange rates are determined.
C)the markets where interest rates are determined.
D)the markets where all borrowers get their funds.
Answer: C
Q3) Between 1950 and 1980 in the U.S.,interest rates trended upward.During this same time period
A)the rate of money growth declined.
B)the rate of money growth increased.
C)the government budget deficit (expressed as a percentage of GNP)trended downward.
D)the aggregate price level declined quite dramatically.
Answer: B
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Chapter 2: An Overview of the Financial System
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Sample Questions
Q1) Well-functioning financial markets
A)cause inflation.
B)eliminate the need for indirect finance.
C)cause financial crises.
D)allow the economy to operate more efficiently.
Answer: D
Q2) Corporations receive funds when their stock is sold in the primary market.Why do corporations pay attention to what is happening to their stock in the secondary market?
Answer: The existence of the secondary market makes their stock more liquid and the price in the secondary market sets the price that the corporation would receive if they choose to sell more stock in the primary market.
Q3) Mortgage-backed securities are similar to ________ but the interest and principal payments are backed by the individual mortgages within the security.
A)bonds
B)stock
C)repurchase agreements
D)negotiable CDs
Answer: A
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4
Chapter 3: What Is Money
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Sample Questions
Q1) ________ is used to make purchases while ________ is the total collection of pieces of property that serve to store value.
A)Money;income
B)Wealth;income
C)Income;money
D)Money;wealth
Answer: D
Q2) Compared to an economy that uses a medium of exchange,in a barter economy
A)transaction costs are higher.
B)transaction costs are lower.
C)liquidity costs are higher.
D)liquidity costs are lower.
Answer: A
Q3) Why are most of the U.S.dollars held outside of the United States?
Answer: Concern about high inflation eroding the value of their own currency causes many people in foreign countries to hold U.S.dollars as a hedge against inflation risk.
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Chapter 4: The Meaning of Interest Rates
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Sample Questions
Q1) A consol paying $20 annually when the interest rate is 5 percent has a price of
A)$100.
B)$200.
C)$400.
D)$800.
Q2) If a security pays $110 next year and $121 the year after that,what is its yield to maturity if it sells for $200?
A)9 percent
B)10 percent
C)11 percent
D)12 percent
Q3) Comparing a discount bond and a coupon bond with the same maturity
A)the coupon bond has the greater effective maturity.
B)the discount bond has the greater effective maturity.
C)the effective maturity cannot be calculated for a coupon bond.
D)the effective maturity cannot be calculated for a discount bond.
Q4) Would it make sense to buy a house when mortgage rates are 14% and expected inflation is 15%? Explain your answer.
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Chapter 5: The Behavior of Interest Rates
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Sample Questions
Q1) When the interest rate is above the equilibrium interest rate,there is an excess ________ money and the interest rate will ________.
A)demand for;rise
B)demand for;fall
C)supply of;fall
D)supply of;rise
Q2) In the figure above,one factor NOT responsible for the decline in the demand for money is
A)a decline the price level.
B)a decline in income.
C)an increase in income.
D)a decline in the expected inflation rate.
Q3) An increase in the expected rate of inflation will ________ the expected return on bonds relative to the that on ________ assets,everything else held constant.
A)reduce;financial
B)reduce;real
C)raise;financial
D)raise;real
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Chapter 6: The Risk and Term Structure of Interest Rates
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Q1) If the yield curve has a mild upward slope,the liquidity premium theory (assuming a mild preference for shorter-term bonds)indicates that the market is predicting
A)a rise in short-term interest rates in the near future and a decline further out in the future.
B)constant short-term interest rates in the near future and further out in the future.
C)a decline in short-term interest rates in the near future and a rise further out in the future.
D)a decline in short-term interest rates in the near future and an even steeper decline further out in the future.
Q2) Which of the following statements is TRUE?
A)State and local governments cannot default on their bonds.
B)Bonds issued by state and local governments are called municipal bonds.
C)All government issued bonds-local,state,and federal-are federal income tax exempt.
D)The coupon payment on municipal bonds is usually higher than the coupon payment on Treasury bonds.
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Chapter 7: The Stock Market, the Theory of Rational
Expectations, and the Efficient Market Hypothesis
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Q1) Another way to state the efficient markets hypothesis is: in an efficient market
A)unexploited profit opportunities will be quickly eliminated.
B)unexploited profit opportunities will never exist.
C)all prices can be accurately predicted.
D)every financial market participant must be well informed about securities.
Q2) Which of the following accurately summarize the empirical evidence about technical analysis?
A)Technical analysts fare no better than other financial analysis-on average they do not outperform the market.
B)Technical analysts tend to outperform other financial analysis,but on average they nevertheless under-perform the market.
C)Technical analysts fare no better than other financial analysis,and like other financial analysts they outperform the market.
D)Technical analysts fare no better than other financial analysis,and like other financial analysts they under-perform the market.
Q3) What rights does ownership interest give stockholders?
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Chapter 8: An Economic Analysis of Financial Structure
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Q1) Of the sources of external funds for nonfinancial businesses in the United States,stocks account for approximately ________ of the total.
A)2%
B)11%
C)20%
D)40%
Q2) High net worth helps to diminish the problem of moral hazard problem by
A)requiring the state to verify the debt contract.
B)collateralizing the debt contract.
C)making the debt contract incentive compatible.
D)giving the debt contract characteristics of equity contracts.
Q3) A problem for equity contracts is a particular type of ________ called the ________ problem.
A)adverse selection;principal-agent
B)moral hazard;principal-agent
C)adverse selection;free-rider
D)moral hazard;free-rider
Q4) Explain the principal-agent problem as it pertains to equity contracts.
Q5) Why does the free-rider problem occur in the debt market?
Q6) How does a mutual fund lower transactions costs through economies of scale?
Page 10
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Chapter 9: Banking and the Management of Financial Institutions
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Q1) Bankers' concerns regarding the optimal mix of excess reserves,secondary reserves,borrowings from the Fed,and borrowings from other banks to deal with deposit outflows is an example of
A)liability management.
B)liquidity management.
C)managing interest rate risk.
D)managing credit risk.
Q2) Duration analysis involves comparing the average duration of the bank's ________ to the average duration of its ________.
A)securities portfolio;non-deposit liabilities
B)assets;liabilities
C)loan portfolio;deposit liabilities
D)assets;deposit liabilities
Q3) If interest rates rise by 5 percentage points,say from 10 to 15%,bank profits (measured using gap analysis)will
A)decline by $0.5 million.
B)decline by $1.5 million.
C)decline by $2.5 million.
D)increase by $2.0 million.
Page 11
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Chapter 10: Economic Analysis of Financial Regulation
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Sample Questions
Q1) The Federal Home Loan Bank Board and the FSLIC,both of which failed in their regulatory tasks,were abolished by the
A)Competitive Equality Banking Act of 1987.
B)Financial Institutions Reform,Recovery and Enforcement Act of 1989.
C)Office of Thrift Supervision.
D)Office of the Comptroller of the Currency.
Q2) Regulators attempt to reduce the riskiness of banks' asset portfolios by
A)limiting the amount of loans in particular categories or to individual borrowers.
B)encouraging banks to hold risky assets such as common stocks.
C)establishing a minimum interest rate floor that banks can earn on certain assets.
D)requiring collateral for all loans.
Q3) In the early stages of the 1980s banking crisis,financial institutions were especially harmed by
A)declining interest rates from late 1979 until 1981.
B)the severe recession in 1981-82.
C)the disinflation from mid 1980 to early 1983.
D)the increase in energy prices in the early 80s.
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Page 12
Chapter 11: Banking Industry: Structure and Competition
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Q1) The Federal Reserve Act of 1913 required that
A)state banks be subject to the same regulations as national banks.
B)national banks establish branches in the cities containing Federal Reserve banks.
C)national banks join the Federal Reserve System.
D)state banks could not join the Federal Reserve System.
Q2) Foreign banks may engage in banking activities in the United States by opening all of the following EXCEPT
A)an agency office of the foreign bank.
B)a subsidiary U.S.bank.
C)a branch of the foreign bank.
D)a McFadden Corporation.
Q3) The process of transforming otherwise illiquid financial assets into marketable capital market instruments is known as
A)securitization.
B)internationalization.
C)arbitrage.
D)program trading.
Q4) Discuss three ways in which U.S.banks can become involved in international banking.
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Chapter 12: Financial Crises
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Q1) If a borrower takes out a $200 million loan in a repo agreement and is asked to post $220 million of mortgage-backed securities as collateral,the "haircut" is A)5%.
B)10%.
C)20%.
D)50%.
Q2) A substantial decrease in the aggregate price level that reduces firms' net worth may stall a recovery from a recession.This process is called A)debt deflation.
B)moral hazard.
C)insolvency.
D)illiquidity.
Q3) Firms that are designated as systemically important financial institutions (SIFIs)are subject to all of the following additional Federal Reserve regulations EXCEPT A)higher capital standards.
B)stricter liquidity requirements.
C)providing a plan for orderly liquidation if necessary.
D)interest rate ceilings on time deposits.
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Chapter 13: Central Banks and the Federal Reserve System
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Q1) Although reserve requirements and the discount rate are not actually set by the ________,decisions concerning these policy tools are effectively made there.
A)Federal Reserve Bank of New York
B)Board of Governors
C)Federal Open Market Committee
D)Federal Reserve Banks
Q2) Under the European System of Central Banks,the Executive Board is similar in structure to the ________ of the Federal Reserve System.
A)Board of Governors
B)Federal Open Market Committee
C)Federal Reserve Banks
D)Federal Advisory Council
Q3) Prior to 1980,member banks left the Federal Reserve System due to
A)the high cost of discount loans.
B)the high cost of required reserves.
C)a desire to avoid interest rate regulations.
D)a desire to avoid credit controls.
Q4) Why does the Federal Reserve Bank of New York play a special role within the Federal Reserve System?
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Chapter 14: The Money Supply Process
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Q1) Everything else held constant,an increase in the required reserve ratio on checkable deposits causes the M1 money multiplier to ________ and the money supply to
A)decrease;increase B)increase;increase C)decrease;decrease D)increase;decrease
Q2) High-powered money minus currency in circulation equals A)reserves.
B)the borrowed base.
C)the nonborrowed base.
D)discount loans.
Q3) Suppose that from a new checkable deposit,First National Bank holds two million dollars in vault cash,eight million dollars on deposit with the Federal Reserve,and one million dollars in required reserves.Given this information,we can say First National Bank has ________ million dollars in excess reserves.
A)three
B)nine
C)ten
D)eleven
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Chapter 15: Tools of Monetary Policy
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Sample Questions
Q1) When good weather speeds the check-clearing process,float tends to ________ causing the Fed to initiate defensive open market ________.
A)decrease;sales
B)decrease;purchases
C)increase;sales
D)increase;purchases
Q2) Discount policy affects the money supply by affecting the volume of ________ and the ________.
A)excess reserves;monetary base
B)borrowed reserves;monetary base
C)excess reserves;money multiplier
D)borrowed reserves;money multiplier
Q3) An increase in ________ reduces the money supply since it causes the ________ to fall.
A)reserve requirements;monetary base
B)reserve requirements;money multiplier
C)margin requirements;monetary base
D)margin requirements;money multiplier
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Chapter 16: The Conduct of Monetary Policy: Strategy and Tactics
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Sample Questions
Q1) During the 1950s,the Fed targeted A)M1.
B)M2.
C)the monetary base.
D)money market conditions.
Q2) The time-inconsistency problem with monetary policy tells us that,if policymakers use discretionary policy,there is a higher probability that the ________ will be higher,compared to policy makers following a behavior rule.
A)inflation rate
B)unemployment rate
C)interest rate
D)foreign exchange rate
Q3) Fluctuations in the demand for reserves cause the Fed to lose control over a monetary aggregate if the Fed targets
A)a monetary aggregate.
B)the monetary base.
C)an interest rate.
D)nominal GDP.
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Chapter 17: The Foreign Exchange Market
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Q1) According to the law of one price,if the price of Colombian coffee is 100 Colombian pesos per pound and the price of Brazilian coffee is 4 Brazilian reals per pound,then the exchange rate between the Colombian peso and the Brazilian real is
A)40 pesos per real.
B)100 pesos per real.
C)25 pesos per real.
D)0.4 pesos per real.
Q2) During the beginning on the global financial crisis in the United States when the effects of the crisis were mostly confined within the United States,the U.S.dollar ________ because demand for U.S.assets ________.
A)appreciated;increased
B)depreciated;increased
C)appreciated;decreased
D)depreciated;decreased
Q3) The exchange rate is
A)the price of one currency relative to gold.
B)the value of a currency relative to inflation.
C)the change in the value of money over time.
D)the price of one currency relative to another.
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Page 19
Chapter 18: The International Financial System
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Sample Questions
Q1) This agency acts like an international lender of last resort to cope with financial instability.
A)World Bank
B)European Central Bank
C)IMF
D)International Bank for Reconstruction and Development
Q2) Countries with surpluses in their balance of payments frequently do not want to see their currencies ________ because it makes their goods ________ expensive abroad.
A)appreciate;less
B)appreciate;more
C)depreciate;less
D)depreciate;more
Q3) Policymakers in a country with a balance of payments surplus may not want to see their country's currency appreciate because this would
A)hurt consumers in their country by making foreign goods more expensive.
B)hurt domestic businesses by making foreign goods cheaper in their country.
C)increase inflation in their country.
D)decrease the wealth of the country.
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Page 20
Chapter 19: Quantity Theory, inflation, and the Demand for Money
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Q1) The reason that economists are so interested in the stability of velocity is because if the demand for money is not stable,then steady growth of the money supply
A)is going to promote price stability at the expense of low unemployment.
B)is going to promote low unemployment at the expense of price stability.
C)is an ineffective way to conduct monetary policy.
D)can still be used to conduct monetary policy if the goal is price stability.
Q2) The average number of times that a dollar is spent in buying the total amount of final goods and services produced during a given time period is known as A)gross national product.
B)the spending multiplier.
C)the money multiplier. D)velocity.
Q3) If nominal GDP is $10 trillion,and the money supply is $2 trillion,velocity is A)0.2.
B)5.
C)10. D)20.
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Page 21
Chapter 20: The Is Curve
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Sample Questions
Q1) Keynes mentioned two factors that influenced planned investment spending
A)interest rates and disposable income.
B)interest rates and business expectations about the future.
C)disposable income and business expectations about the future.
D)interest rates and business expectations about inflation.
Q2) Factors that influenced planned investment spending include
A)real interest rates.
B)financial frictions.
C)emotional waves of optimism and pessimism.
D)all of the above.
E)A and C.
Q3) Everything else held constant,if aggregate output is to the ________ of the IS curve,then there is an excess ________ of goods which will cause aggregate output to fall.
A)right;supply
B)right;demand
C)left;supply
D)left;demand
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Chapter 21: The Monetary Policy and Aggregate Demand
Curves
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Q1) Based on the Taylor Principle,a central bank's endogenous response of raising interest rates when inflation rises
A)causes an upward movement along the monetary policy curve.
B)causes a downward movement along the monetary policy curve.
C)shifts the monetary policy curve upward.
D)shifts the monetary policy curve downward.
Q2) The aggregate demand curve is downward sloping because a higher inflation rate leads the central bank to raise ________ interest rates,thereby ________ the level of equilibrium aggregate output.,everything else held constant.
A)real;lowering
B)real;raising
C)nominal;lowering
D)nominal;raising
Q3) Based on the Taylor Principle,a central bank's endogenous response of decreasing interest rates when inflation falls
A)causes an upward movement along the monetary policy curve.
B)causes a downward movement along the monetary policy curve.
C)shifts the monetary policy curve upward.
D)shifts the monetary policy curve downward.
Page 23
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Chapter 22: Aggregate Demand and Supply Analysis
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Q1) Everything else held constant,when actual output exceeds the natural rate of output ________ aggregate supply ________.
A)short-run;decreases
B)short-run;increases C)long-run;increases D)long-run;decreases
Q2) A positive spending shock ________ real interest rates and ________ output in the short run,thereby its effect on stock prices is ________.
A)raises;lowers;positive B)raises;raises;ambiguous C)lowers;raises;negative D)lowers;raises;positive
Q3) Everything else held constant,an increase in financial frictions ________ aggregate ________.
A)increases;demand B)decreases;demand C)decreases;supply D)increases;supply
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Chapter 23: Monetary Policy Theory
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Q1) When the economy suffers a temporary negative supply shock and the monetary policy makers try to stabilize economic activity in the short run,then
A)aggregate demand curve shifts rightward.
B)output will be at its potential.
C)inflation rate will be higher.
D)all of the above.
E)both A and B.
Q2) When the economy suffers a permanent negative supply shock and the central bank responds by changing the autonomous component of monetary policy to keep inflation at the target inflation rate,then
A)aggregate demand curve shifts leftward.
B)output will be unchanged.
C)output will be at its potential.
D)all of the above.
E)both A and C.
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25
Chapter 24: The Role of Expectations in Monetary Policy
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Q1) Potential advantages of nominal GDP targeting include
A)it implies that the central bank will respond to slowdowns in the real economy even if inflation is not falling.
B)real GDP growth that is below potential or inflation that is below the inflation objective will encourage more expansionary monetary policy.
C)it focuses not only on controlling inflation but also explicitly on stabilizing real GDP.
D)all of the above.
Q2) Suppose that there is a positive aggregate demand shock and the central bank commits to an inflation rate target.If the commitment is credible,then
A)the public's expected inflation will remain unchanged.
B)the short-run aggregate supply curve will not shift.
C)over time inflation will fall back down to the inflation target.
D)all of the above.
E)both A and B.
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Chapter 25: Transmission Mechanisms of Monetary Policy
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Q1) ________ examines whether one variable affects another by using data to build a model that explains the channels through which this variable affects the other.
A)Indirect-model evidence
B)Organizational-model evidence
C)Reduced-form evidence
D)Structural-model evidence
Q2) An expansionary monetary policy may cause asset prices to rise,thereby reducing the likelihood of financial distress and causing consumer durable and housing expenditures to rise.This monetary transmission mechanism is referred to as
A)the household liquidity effect.
B)the wealth effect.
C)Tobin's q theory.
D)the cash flow effect.
Q3) During the Great Depression,Tobin's q
A)rose dramatically,as did real interest rates.
B)fell to unprecedentedly low levels.
C)stayed fairly constant,in contrast to most other economic measures.
D)rose only slightly,in spite of Hoover's attempts to prop it up.
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Chapter 26: Web 1:financial Crises in Emerging Market
Economies
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Q1) A feature of debt markets in emerging-market countries is that debt contracts are typically
A)very short term.
B)long term.
C)intermediate term.
D)perpetual.
Q2) At the time of the South Korean financial crisis,the government allowed many chaebol owned finance companies to convert to merchant banks.Finance companies ________ allowed to borrow abroad and merchant banks ________.
A)were not;could borrow abroad
B)were not;could not borrow abroad
C)were;could borrow abroad
D)were;could not borrow abroad
Q3) The two key factors that trigger speculative attacks on emerging market currencies are
A)deterioration in bank balance sheets and severe fiscal imbalances.
B)deterioration in bank balance sheets and low interest rates abroad.
C)low interest rates abroad and severe fiscal imbalances.
D)low interest rates abroad and rising asset prices.
Page 28
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Chapter 27: Web 2:the Islm Model
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Q1) If the economy is on the LM curve,but is to the right of the IS curve,aggregate output will ________ and the interest rate will ________.
A)rise;rise
B)rise;fall
C)fall;rise
D)fall;fall
Q2) In the long-run ISLM model and with everything else held constant,the long-run effect of an autonomous increase in investment is to ________ real output and ________ the interest rate.
A)increase;increase
B)increase;not change
C)not change;increase
D)not change;decrease
Q3) If the economy is on the LM curve,but is to the left of the IS curve,aggregate output will ________ and the interest rate will ________.
A)rise;rise
B)rise;fall
C)fall;rise
D)fall;fall
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Chapter 28: Web 3:nonbank Finance
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Q1) When those most likely to produce the outcome insured against are the ones who purchase insurance,insurance companies are said to face the problem of
A)fraudulent claims.
B)moral hazard.
C)adverse selection.
D)pecuniary purchases.
Q2) The type of credit insurance that landed AIG into trouble in 2008 is called
A)insurance rate swaps.
B)monoline insurance.
C)default insurance.
D)credit default swaps.
Q3) Before 1970,mutual funds invested almost solely in
A)corporate bonds.
B)corporate common stocks.
C)United States government bonds.
D)municipal bonds and money market securities.
Q4) Explain the problems that necessitate insurance management,and three methods insurance companies use to address these problems.Identify the problem that each practice addresses.
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Chapter 29: Web 4:financial Derivatives
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90 Verified Questions
90 Flashcards
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Sample Questions
Q1) If you sell a $100,000 interest-rate futures contract for 105,and the price of the Treasury securities on the expiration date is 108,your ________ is ________.
A)profit;$3000
B)loss;$3000
C)profit;$8000
D)loss;$8000
Q2) If you buy a call option on Treasury futures at 115,and at expiration the market price is 110,the ________ will ________ exercised.
A)call;be
B)put;be
C)call;not be
D)put;not be
Q3) Hedging risk for a short position is accomplished by A)taking a long position.
B)taking another short position.
C)taking additional long and short positions in equal amounts.
D)taking a neutral position.
Q4) Show graphically and explain the profits and losses of buying futures relative to buying call options.
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Chapter 30: Web 5:conflicts of Interest in the Financial
Services Industry
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Sample Questions
Q1) If firms have an incentive to hide information from mandatory disclosure because the information is proprietary,then which of the following remedies is the least intrusive way to overcome this incentive?
A)leave it to the market
B)separation of functions
C)supervisory oversight
D)socialization of information production
Q2) Conflicts of interest may arise within the credit rating agencies because
A)the investors pay the credit agencies for ratings.
B)the issuers of debt securities pay the credit agencies for ratings.
C)the credit rating agencies provide auditing services to issuers of debt securities.
D)the credit rating agencies are involved in offering credit counseling to investors.
Q3) Conflicts of interest arising from management advisory services brought down ________ in 2002.
A)Enron
B)WorldComm
C)Arthur Andersen
D)Global Crossing
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