Financial Markets and Institutions
Test Preparation
Course Introduction
This course provides a comprehensive overview of financial markets and the various institutions that play a vital role in the global financial system. Students will explore the structure, functions, and operations of financial markets including money, bond, equity, and derivatives markets as well as the regulatory environment influencing them. The course examines the roles of key financial institutions such as banks, insurance companies, mutual funds, and pension funds, highlighting how these entities facilitate the flow of funds, manage risk, and promote economic growth. Moreover, students will analyze market instruments, interest rate determination, the effects of monetary policy, and current trends affecting financial markets and institutions worldwide.
Recommended Textbook Bank Management and Financial Services 9th Edition by Peter S. Rose
Available Study Resources on Quizplus
20 Chapters
2365 Verified Questions
2365 Flashcards
Source URL: https://quizplus.com/study-set/2681 Page 2
Chapter 1: An Overview of the Changing Financial-Services Sector
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/53502
Sample Questions
Q1) Which of the following is considered a depository financial institution?
A)Mortgage company
B)Private pension funds
C)Savings and Loan associations
D)Money market funds
E)Insurance company
Answer: C
Q2) Current theory suggests that banks exist because of imperfections in our financial system.
A)True
B)False
Answer: True
Q3) Which of the following are the implied motivators of reforms that have taken place in the banking sector since the credit crisis of 2007-2009?
A)Increased liquidity
B)Increased dominance of the largest financial firms
C)Increased disclosure of credit charges and other consumer expenses
D)Increased number of bank branches
E)Increased speed of innovation and invention
Answer: E
Page 3
To view all questions and flashcards with answers, click on the resource link above.
Chapter 2: The Impact of Government Policy and Regulation on
the Financial-Services Industry
Available Study Resources on Quizplus for this Chatper
90 Verified Questions
90 Flashcards
Source URL: https://quizplus.com/quiz/53501
Sample Questions
Q1) The _____________________ makes it faster and less costly for banks to clear checks.It allows for banks to electronically send check images instead of shipping paper checks across the country.
Answer: Check 21 Act
Q2) The moral hazard problem of banks is caused by the fixed insurance premiums paid by banks which make them accept greater risk.
A)True
B)False
Answer: True
Q3) The 1994 Federal Interstate Banking bill does not limit the percentage of statewide or nationwide deposits that an interstate banking firm is allowed to control.
A)True
B)False
Answer: False
Q4) The __________________________ brought bank holding companies under the jurisdiction of the Federal Reserve. Answer: Bank Holding Company Act
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: The Organization and Structure of Banking and the Financial-Services Industry
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/53500
Sample Questions
Q1) Banks tend to have a higher proportion of outside directors than a typical manufacturing firm.
A)True
B)False Answer: True
Q2) Banks acquired by holding companies are referred to as affiliated banks.
A)True
B)False Answer: True
Q3) Less than 10 percent of the largest banks in the U.S.control almost 90 percent of the industry assets.
A)True
B)False Answer: True
Q4) Nearly three quarters of all U.S.banks exceed $100 million in asset size apiece.
A)True
B)False
Answer: False
Answer: independent Page 5
Q5) A bank that is not owned by a holding company is called a(n)______________ bank.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 4: Establishing
New Banks, Branches, ATMs, Telephone Services, and Websites
Available Study Resources on Quizplus for this Chatper
109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/53499
Sample Questions
Q1) A personal identification number (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 options are correct.
Q2) More desirable office sites for new bank branches normally have residents who are above-average in age.
A)True
B)False
Q3) Increases in ______________ ratios tend to reduce new chartering activities in a particular region.
A)gross NPA
B)net NPA
C)liquidity
D)concentration
E)net interest margin
Q4) The ____________________ issues charters for new state banks.
Q5) The acronym ACH stands for _____________.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 5: The Financial Statements of Banks and Their Principal Competitors
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/53498
Sample Questions
Q1) Which of the following accounts is also called the bank's primary reserves?
A)Cash and deposits due from banks
B)Investment securities
C)Trading account securities
D)Fed funds sold
E)None of the options are correct.
Q2) One-time-only transactions that often involve sale of 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 options are correct.
Q3) The principal types of __________________________ include fee income,income from fiduciary activities,and service charges on deposits.
Q4) A(n)__________________________ is where the financial institution agrees to guarantee repayment of a customer's loan,which the customer has received from a third party.
Page 8
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Measuring and Evaluating the Performance of Banks
and Their Principal Competitors
Available Study Resources on Quizplus for this Chatper
118 Verified Questions
118 Flashcards
Source URL: https://quizplus.com/quiz/53497
Sample Questions
Q1) The ratio of a bank's interest income from its loans and security investments less interest expenses on debt issued,divided by total earning assets measures a bank's:
A)net operating margin.
B)net return before special transactions.
C)net interest margin.
D)return on assets.
E)None of the options is correct
Q2) One of the measures of a bank's efficiency and return is "earnings spread".It is calculated by the ratio of total interest income to total liabilities as reduced by the ratio of total interest expenses to total assets.
A)True
B)False
Q3) If the expected stream of future dividends for a bank's shareholder rises,the bank's stock price should also rise,other factors held constant.
A)True
B)False
Q4) __________________________ assets,including loans,are those which are past due by 90 days or more.
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 7: Risk Management for Changing Interest Rates:
Asset-Liability Management and Duration Techniques
Available Study Resources on Quizplus for this Chatper
155 Verified Questions
155 Flashcards
Source URL: https://quizplus.com/quiz/53496
Sample Questions
Q1) The Arnold National Bank has a bond portfolio that consists of bonds with 5 years to maturity and a 9 percent coupon rate having a face value of $1,000.These bonds are selling in the market for $1,126.Coupon payments are made annually on this bond. What is duration of these bonds?
A)3.77 years
B)4.23 years
C)5 years
D)9 years
E)None of the options is correct.
Q2) U.S.banks having positive maturity gap positions tend to do better when the yield curve is upward-sloping.
A)True
B)False
Q3) __________________ is the weighted average maturity for a stream of future cash flows.
Q4) The relationship between a change in an asset's price and an asset's change in the yield or interest rate is captured by _________________________.
Q5) Money market deposits are included as part of ______________________ for banks.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 14: Investment Banking,Insurance,and Other
Sources of Fee Income
Available Study Resources on Quizplus for this Chatper
148 Verified Questions
148 Flashcards
Source URL: https://quizplus.com/quiz/53495
Sample Questions
Q1) A currency swap is where two parties agree to exchange interest payments in order to hedge against interest rate risk.
A)True
B)False
Q2) A swap where the notional amount declines over time is called:
A)a quality swap
B)a bullet swap
C)an amortizing swap
D)an accruing swap
E)None of the options are correct
Q3) An effective hedge is one where the positive or negative returns earned in the cash market are approximately offset by the profit or loss from futures trading.
A)True
B)False
Q4) In an interest rate swap,the ________________________ or principal amount is not exchanged.
Q5) Virtually all banks in the U.S.use derivative contracts to hedge their risks.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 9: Risk Management: Asset-Backed Securities,
Loan Sales, Credit Standbys, and Credit Derivatives
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/53494
Sample Questions
Q1) A bank or any other lender whose loans are pooled is called:
A)the originator.
B)the special-purpose entity.
C)the trustee.
D)the servicer.
E)the credit enhancer.
Q2) Insurance companies are the principal __________ of credit derivatives.
Q3) Most loans that banks sell off their balance sheets have minimum denominations of at least a million dollars.
A)True
B)False
Q4) Securitization had its origin in the selling of securities backed by ____________.
A)credit card receivables
B)residential mortgage loans
C)computer leases
D)automobile loans
E)truck leases
Q5) Often when loans are securitized,they are passed on to a(n)________________ which pools the loans and sells securities.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 10: The Investment Function in Financial-Services Management
Available Study Resources on Quizplus for this Chatper
113 Verified Questions
113 Flashcards
Source URL: https://quizplus.com/quiz/53493
Sample Questions
Q1) An investor's return on a T-bill consists purely of:
A)cash dividends.
B)coupon payments.
C)price appreciation.
D)stock dividends
E)special dividends.
Q2) A bond has six years to maturity and has a coupon rate of 7.5 percent.Coupon payments are made annually and the bond has a face value of $1,000.The bond is currently selling in the market for $1,127.What is the yield-to-maturity on this bond?
A)7.5 percent
B)5 percent
C)11.5 percent
D)2.5 percent
E)None of the options is correct
Q3) ________________ are instruments that are closely related to CMOs that also partition the cash flow from a pool of mortgage loans or mortgage-backed securities into multiple maturity classes in order to reduce the cash-flow uncertainty of investors.
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 11: Liquidity and Reserves Management: Strategies and Policies
Available Study Resources on Quizplus for this Chatper
119 Verified Questions
119 Flashcards
Source URL: https://quizplus.com/quiz/53492
Sample Questions
Q1) "Core deposits","hot money",and "vulnerable money" are categories of funds under which of the following methods of estimating a bank's liquidity needs?
A)Sources and uses of funds approach
B)Structure of funds approach
C)Liquidity indicator approach
D)Sources and uses of funds approach and liquidity indicator approach
E)None of the options is correct
Q2) The base amount of transaction deposits for a depository institution above which the legal reserve requirement changes to ten percent is known as:
A)reserve base.
B)reserve tranche.
C)base limit.
D)limit tranche.
E)cut-off tranche.
Q3) One of the ratios used in the liquidity indicator approach to managing a financial institution's liquidity needs is ___________.This ratio is cash and deposits due from depository institutions divided by total assets,where a greater ratio indicates a stronger liquidity position.
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 12: Managing and Pricing Deposit Services
Available Study Resources on Quizplus for this Chatper
129 Verified Questions
129 Flashcards
Source URL: https://quizplus.com/quiz/53491
Sample Questions
Q1) A traditional savings account with transactions and balances evidenced by the entries recorded in a booklet kept by the customer is called:
A)passbook savings account.
B)statement savings plan.
C)negotiable order of withdrawal.
D)money market mutual fund.
E)None of the options is correct.
Q2) A(n)_________________________ is a short-maturity deposit which pays a competitive interest rate.Only six preauthorized drafts per month are allowed but only three withdrawals can be made by writing checks.
Q3) According to recent studies cited in this chapter,the number one factor that households consider in selecting a bank to hold their checking account is low fees and low minimum balance.
A)True
B)False
Q4) A(n)_________________________ is a conditional method of pricing deposit services in which the fees paid by the customer depend mainly on the account balance and volume of activity.
Q5) The _________________________ is the added cost of bringing in new funds.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 13: Managing Nondeposit Liabilities
Available Study Resources on Quizplus for this Chatper
116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/53490
Sample Questions
Q1) Common nondeposit borrowings of a bank are _____-term rather than ______-term debt.
Q2) First National Bank is planning to raise $30 million through an offering of negotiable CDs.The current rate for similar CDs is 5.5 percent.Noninterest cost rate for CDs is 0.25 percent.First National pays a deposit insurance premium of 0.0023 per dollar of insured deposits.Due to other immediate cash needs,only $25 million will be fully invested.What is the effective cost rate of borrowing in the CD market for the bank?
A)6.9 percent
B)7.2 percent
C)6.0 percent
D)5.5 percent
E)None of the options is correct.
Q3) The traditional and principal source of bank funds is deposits. A)True B)False
Q4) When the first priority of a bank is to make loans to all good quality loan customers it is following the _________________________ doctrine.
Q5) Dollar-denominated CDs issued outside the U.S.are called
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 14: Investment Banking, insurance, and Other
Sources of Fee Income
Available Study Resources on Quizplus for this Chatper
73 Verified Questions
73 Flashcards
Source URL: https://quizplus.com/quiz/53489
Sample Questions
Q1) As a consequence of recent legislation,banks cannot offer insurance products or services.
A)True
B)False
Q2) Which of the following activities of a bank falls under the insurance sales and underwriting services?
A)Providing risk management services for persons and property.
B)Security underwriting.
C)Brokering securities for clients.
D)Providing credit guarantees.
E)Distributing new securities and interest.
Q3) The prohibition against combining investment banking and commercial banking activity during the Depression-era,centered on possibly forcing customers seeking loans to buy securities that the IB was trying to sell and increasing the risk exposure of commercial banking firms.
A)True
B)False
Q4) The most rapidly growing source of income for banks is ________ income.
Page 17
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: The Management of Capital
Available Study Resources on Quizplus for this Chatper
129 Verified Questions
129 Flashcards
Source URL: https://quizplus.com/quiz/53488
Sample Questions
Q1) A standby letter of credit,backing the issue of state and local government general obligation bonds,is given a credit risk-weight of 20 percent because of its:
A)modest credit risk.
B)zero credit risk.
C)moderate credit risk.
D)low credit risk.
E)highest credit risk.
Q2) Core capital such as common stock and surplus,undivided profits,qualifying noncumulative perpetual preferred stock,etc.is referred to as __________________ capital,as defined by the Basel agreement.
Q3) According to the textbook,the role(s)of capital is to:
A)provide a cushion against failure risk.
B)provide funds needed to charter,organize,and operate a bank.
C)promote public confidence.
D)support growth and the development of new services.
E)All of the options are correct.
Q4) ____________ models attempt to measure price or market risk of a portfolio of assets and attempt to determine the maximum loss they might sustain over a designated period of time.
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 16: Lending Policies and Procedures: Managing Credit Risk
Available Study Resources on Quizplus for this Chatper
125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/53487
Sample Questions
Q1) The First State Bank is located in Guyman which is in the middle of the wheat country of Oklahoma and as a result many of its loans are agriculture loans.What factor determining the growth and mix of loans does this fact reflect?
A)Characteristics of the market area
B)Lender size
C)The experience and expertise of management
D)The written loan policy of the bank
E)Bank regulations
Q2) At least once in a year,banks in the United States are required to report the composition of their loan portfolio by purpose of loan on a report form known as Schedule
A.
A)True
B)False
Q3) A written loan policy gives loan officers and the bank's management specific guidelines in making individual loan decisions and in forming the bank's loan portfolio.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 17: Lending to Business Firms and Pricing Business Loans
Available Study Resources on Quizplus for this Chatper
158 Verified Questions
158 Flashcards
Source URL: https://quizplus.com/quiz/53486
Sample Questions
Q1) In a period of rising interest rates,the times-prime method causes the customer's loan rate to rise faster than the prime-plus method.
A)True
B)False
Q2) Working capital loans often require _____________________.These are required deposits in the bank by the borrower whose size is dependent on the size of the credit line.
Q3) _________________________________ is a way to price loans which starts with the costs of making a loan and adds to it a risk premium for default risk and a desired profit margin.
Q4) The sum of the default-risk premium plus the term-risk premium on a business loan is one of the elements of the cost-plus loan pricing method.
A)True
B)False
Q5) The basic weakness of the cost-plus loan pricing method is that it gives little regard to the competition from other lenders while setting the loan price.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 18: Consumer Loans, Credit Cards, and Real Estate
Lending
Available Study Resources on Quizplus for this Chatper
155 Verified Questions
155 Flashcards
Source URL: https://quizplus.com/quiz/53485
Sample Questions
Q1) According to recent research findings,the quotation of the APR to customers on the loan they are requesting usually discourages consumers from shopping around.
A)True
B)False
Q2) Which of the following is an advantage of a credit scoring model?
A)Credit scoring models rely on the evaluation of an experienced credit officer
B)Credit scoring models are immune from charges of discrimination
C)Credit scoring models never make mistakes
D)Credit scoring models can handle a large volume of applications in a short period of time
E)All of the options are advantages of credit scoring models
Q3) ______________________________________ is a practice of granting loans to weaker borrowers and charging them excessive fees and interest rates,increasing their risk of default.
Q4) The law that requires full disclosure of credit terms and which promotes the informed use of credit is the ______________________ Act.This law requires banks to report the APR of the loan,the dollar amount of all finance charges and,where appropriate,all fees.
Page 21
To view all questions and flashcards with answers, click on the resource link above.
Chapter 19: Acquisitions and Mergers in Financial-Services Management
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/53484
Sample Questions
Q1) Suppose there are four banks in a local community.Each of these banks has 25 percent of the deposits in this community.According to the Department of Justice guidelines,this market is:
A)unconcentrated.
B)mildly concentrated.
C)moderately concentrated.
D)highly concentrated.
E)None of the options is correct
Q2) Empirical evidence suggests that earnings outcomes from mergers exhibit:
A)a symmetric distribution.
B)a positively skewed distribution.
C)a negatively skewed distribution.
D)a leptokurtic distribution.
E)no fixed pattern of distribution.
Q3) One of the reasons for a merger is _________________.This is where the merger is encouraged by the FDIC as a way to conserve scarce federal deposit insurance resources.
Q4) One reason banks pursue mergers is for _____________________.This allows the bank to reduce fluctuations in revenues and net income.
22
To view all questions and flashcards with answers, click on the resource link above.
Chapter 20: International Banking and the Future of Banking and Financial Services
Available Study Resources on Quizplus for this Chatper
116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/53483
Sample Questions
Q1) Which of the following is a risk evaluation system in international lending today?
A)The Seat-of-the-pants method
B)The Discrimination method
C)The Delphi method
D)The State-risk indicator method
E)None of the options is correct.
Q2) A(n)_______________ is a draft for payment due and payable upon presentation to the bank.
Q3) The Eurobond market provides a firm with access to funds outside its home country.
A)True
B)False
Q4) The International Lending and Supervision Act does not require federal regulators to supervise the U.S.banks under their jurisdiction more closely but to give banks and the private marketplace more freedom in deciding what their capital requirements should be.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 23