Financial Services Management Mock Exam https://quizplus.com/study-set/3311 18 Chapters 1157 Verified Questions
Financial Services Management Mock Exam Course Introduction Financial Services Management provides an in-depth exploration of the principles, practices, and regulatory frameworks governing the financial services industry. Students will examine the structure and functioning of key financial institutions, including banks, insurance companies, investment firms, and fintech organizations. The course emphasizes risk management, product development, customer relationship strategies, and the impact of technological advancements on financial services. Through case studies and practical applications, learners will develop the analytical and managerial skills necessary to thrive in a dynamic and evolving financial sector.
Recommended Textbook Financial Institutions Management 3rd Edition by Lange
Available Study Resources on Quizplus 18 Chapters 1157 Verified Questions 1157 Flashcards Source URL: https://quizplus.com/study-set/3311
Page 2
Chapter 1: Why Are Financial Institutions Special Available Study Resources on Quizplus for this Chatper 66 Verified Questions 66 Flashcards Source URL: https://quizplus.com/quiz/65728
Sample Questions Q1) Which of the following is an adequate definition of an asset transformer? A)A corporation that issues financial claims that are more attractive to household savers than the claims issued by other corporations. B)An FI that issues financial claims that are more attractive to household savers than the claims issued by other FIs. C)A corporation that issues financial claims that are more attractive to household savers than the claims directly issued by FIs. D)An FI that issues financial claims that are more attractive to household savers than the claims directly issued by corporations. Answer: D Q2) Because the average maturity of assets and the average maturity of liabilities are often different on an FI's balance sheet, the FI is exposed to liquidity risk. A)True B)False Answer: False To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: The Financial Services Industry: Depository Institutions Available Study Resources on Quizplus for this Chatper 66 Verified Questions 66 Flashcards Source URL: https://quizplus.com/quiz/65727
Sample Questions Q1) Responding to the financial crisis, the Australian government introduced a number of measures to ease liquidity issues and included the following: A)a permanent financial claims scheme (FCS) in October 2008, which explicitly guaranteed bank deposits with a $1 million cap. B)a semi-permanent financial claims scheme (FCS), which implicitly guaranteed bank deposits. C)a permanent guarantee scheme for large deposits and wholesale funding, which for a fee, guaranteed bank deposits greater than $1 million. D)a permanent financial claims scheme (FCS) in October 2008, which explicitly guaranteed bank deposits with a $1 million cap; the guarantee was reduced to $250 000 per depositor from 2012. Answer: D Q2) Which of the following is not an off-balance-sheet activity for banks? A)derivative contracts B)loan commitments C)standby letters of credit D)trust services Answer: D To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: The Financial Services Industry: Other Financial Institutions Available Study Resources on Quizplus for this Chatper 56 Verified Questions 56 Flashcards Source URL: https://quizplus.com/quiz/65726
Sample Questions Q1) Which of the following are key features of the regulatory and supervisory environment of the insurance industry? A)Life insurance companies are now freed of capital adequacy regulations. B)Life insurance companies have additional reporting requirements. C)Overall, life insurance companies are less regulated than before to enhance innovation in the industry. D)All of the listed options are correct. Answer: B Q2) Which of the following statements is true? A)The cash surrender value of a policy is normally only a portion of the contract's face value. B)The cash surrender value of a policy is normally equal to the contract's face value. C)The cash surrender value of a policy is normally more than the contract's face value. D)A generalisation of the cash surrender value of a policy in relation to its face value is not possible. Answer: A To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Risk of Financial Institutions Available Study Resources on Quizplus for this Chatper 67 Verified Questions 67 Flashcards Source URL: https://quizplus.com/quiz/65725
Sample Questions Q1) The market risk of an FI increases with: A)increasing volatility of asset prices. B)increasingly large unhedged short positions in bonds, equities and other commodities. C)increasingly large unhedged long positions in bonds, equities and other commodities. D)All of the listed options are correct. Q2) Technological risk: A)can only lead to an FI's short-term distress. B)refers to the scenario that technological investments produce the anticipated cost savings. C)can result in major losses and the long-term viability of the FI. D)refers to the scenario that technological investments do not produce the anticipated savings, and can cause major losses and impact on the viability of the FI. Q3) When analysing an FI's performance, it is not important to consider its off-balance-sheet activities as they have no current or future impact on the FI's financial standing. A)True B)False To view all questions and flashcards with answers, click on the resource link above.
Page 6
Chapter 5: Interest Rate Risk Measurement: The Repricing Model Available Study Resources on Quizplus for this Chatper 69 Verified Questions 69 Flashcards Source URL: https://quizplus.com/quiz/65724
Sample Questions Q1) The repricing model ignores information regarding the distribution of assets and liabilities within maturity buckets.This limitation of the model refers to: A)market value effect. B)over-aggregation. C)runoffs and pre-payments. D)off-balance sheet activities. Q2) The Reserve Bank of Australia's (RBA) undertook actions in regards to their open market operation in the post global financial crisis environment to move financial markets towards greater stability.This was achieved by: A)increasing the maturity of repos to reduce money pressure in the money market over the longer term. B)increasing RBA holdings of non-government securities for use with repos due to the shortage of government securities C)increasing the supply of deposits held by banks and other authorised deposit-taking institutions in their exchange settlement accounts held with the RBA. D)All of the listed options are correct. To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 6: Interest Rate Risk Measurement: The Duration Model Available Study Resources on Quizplus for this Chatper 64 Verified Questions 64 Flashcards Source URL: https://quizplus.com/quiz/65723
Sample Questions Q1) Immunisation of a portfolio implies that changes in _______ will not affect the value of the portfolio. A)book value of assets B)maturity C)interest rates D)duration Q2) Convexity is defined as: A)the degree of curvature of the price-yield curve around some maturity level. B)the degree of curvature of the price-yield curve around some price level. C)the degree of curvature of the price-yield curve around some interest rate level. D)None of the listed options are correct. Q3) What is the duration of a 5-year par value zero coupon bond yielding 10 per cent annually? A)0.50 years B)2 years C)4.40 years D)5 years Q4) Would you consider convexity of a fixed-income security to be desirable or undesirable for an FI? Explain your opinion. Page 8 To view all questions and flashcards with answers, click on the resource link above.
Chapter 7: Managing Interest Rate Risk Using Off Balance Sheet Instruments Available Study Resources on Quizplus for this Chatper 63 Verified Questions 63 Flashcards Source URL: https://quizplus.com/quiz/65722
Sample Questions Q1) Which of the following is true of the market price of a futures contract over time? A)It is set at time 0. B)It is fixed over the life of the contract. C)It changes based on the market value of the underlying asset. D)It decreases with time to expiration. Q2) Which of the following statements is true? A)Routine hedging seeks to hedge all interest rate risk exposure. B)Routine hedging seeks to hedge all foreign exchange rate risk exposure. C)Routine hedging seeks to hedge all liquidity risk exposure. D)Routine hedging seeks to hedge all capital risk exposure. Q3) Financial futures are used by FIs to manage: A)credit risk. B)interest rate risk. C)liquidity risk. D)sovereign country risk. Q4) In a put option, the purchaser of the bond option is committed to handing over the specified bond at a specified time. A)True B)False
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Credit Risk I: Individual Loan Risk Available Study Resources on Quizplus for this Chatper 65 Verified Questions 65 Flashcards Source URL: https://quizplus.com/quiz/65721
Sample Questions Q1) Choose the correct answer: A)Regulatory taxes such as reserve requirements create an incentive for banks to remove loans from the balance sheet by selling them without recourse to outside parties. B)Regulatory taxes such as reserve requirements create an incentive for banks to offer low rate mortgages. C)Regulatory taxes such as reserve requirements create an incentive for banks limit their lending to large corporates only. D)None of the listed options are correct. Q2) Collateralised debt obligation (CDO) is: A)an asset-backed bond issued in multiple classes or tranches. B)a mortgage issued in multiple classes or tranches. C)unsecured notes issued in multiple classes or tranches. D)commercial paper issued with collateral. Q3) Assumable mortgage is a mortgage contract that is: A)transferred from the seller to the buyer of a house. B)assumed to be paid off. C)transferred from the buyer to the seller of a house. D)non-transferrable. To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Market Risk Available Study Resources on Quizplus for this Chatper 55 Verified Questions 55 Flashcards Source URL: https://quizplus.com/quiz/65720
Sample Questions Q1) Which of the following statements is true? A)Daily earnings at risk are defined as the dollar market value of a position plus the price sensitivity of the position plus the potential adverse move in yield. B)Daily earnings at risk are defined as the dollar market value of a position multiplied by the price sensitivity of the position multiplied by the potential adverse move in yield. C)Daily earnings at risk are defined as (the dollar market value of a position plus the price sensitivity of the position) multiplied by the potential adverse move in yield. D)Daily earnings at risk are defined as the dollar market value of a position divided by (the price sensitivity of the position plus the potential adverse move in yield). Q2) Which of the following is a measure of systematic risk? A)alpha B)beta C)gamma D)sigma Q3) Why is market risk measurement important? To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Credit Risk I: Individual Loan Risk Available Study Resources on Quizplus for this Chatper 66 Verified Questions 66 Flashcards Source URL: https://quizplus.com/quiz/65719
Sample Questions Q1) Which of the following statements is false? A)Default risk is the risk that the borrower is willing but unable to fulfil the terms promised under loan contract. B)Default risk is the risk that the borrower refinances the loan before maturity. C)Default risk is the risk that the borrower is able but unwilling to fulfil the terms promised under loan contract. D)Default risk is the risk that the borrower is unable and unwilling to fulfil the terms promised under loan contract. Q2) The prime lending rate is the: A)risk premium periodically set by the RBA. B)base lending rate periodically set by banks. C)base lending rate periodically set by the RBA. D)risk premium periodically set by banks. Q3) Which of the following is the correct definition of leverage? A)The ratio of equity to debt. B)The ratio of assets to debt. C)The ratio of debt to assets. D)The ratio of debt to equity. To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Credit Risk II: Loan Portfolio and Concentration Risk Available Study Resources on Quizplus for this Chatper 63 Verified Questions 63 Flashcards Source URL: https://quizplus.com/quiz/65718
Sample Questions Q1) Which of the following statements is true? A)The objective of risk-indifferent FI managers is to minimise portfolio risk regardless of the portfolio's return. B)The objective of risk-indifferent FI managers is to minimise portfolio risk in turn for higher returns on the portfolio. C)The objective of risk-averse FI managers is to minimise portfolio risk in turn for higher returns on the portfolio. D)The objective of risk-averse FI managers is to minimise portfolio risk regardless of the portfolio's return. Q2) Assume that an FI's concentration limit on a particular sector is 15 per cent and that the sector's loss rate is 25 per cent.What is the maximum loss as a percentage of the FI's capital (round to two decimals)? A)1.67 per cent B)0.60 per cent C)10.00 per cent D)3.75 per cent Q3) Explain the basic concept of loan loss ratio based models. To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Sovereign Risk Available Study Resources on Quizplus for this Chatper 65 Verified Questions 65 Flashcards Source URL: https://quizplus.com/quiz/65717
Sample Questions Q1) Which of the following are normally traded at very deep discounts from 100 per cent? A)Restructured loans. B)Brady bonds. C)Sovereign bonds. D)Nonperforming loans. Q2) Which of the following are reasons why debt rescheduling is more likely than debt repudiation? A)There are fewer FIs in any international lending syndicate compared to the number of bondholders. B)Many international loan syndicates comprise the same groups of FIs, increasing the probability of consensus in case of rescheduling. C)There are more FIs in any international lending syndicate compared to the number of bondholders. D)There are fewer FIs in any international lending syndicate compared to the number of bondholders and many international loan syndicates comprise the same groups of FIs, increasing the probability of consensus in case of rescheduling only. To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Foreign Exchange Risk Available Study Resources on Quizplus for this Chatper 63 Verified Questions 63 Flashcards Source URL: https://quizplus.com/quiz/65716
Sample Questions Q1) Which of the following statements is true for an FI that holds €200 000 in assets and €250 000 in liabilities? A)The FI is in a net short position. B)The FI has net foreign assets of €50 000. C)The FI faces the risk that the euro will fall in value against domestic currency. D)All of the listed options are correct. Q2) Off-balance-sheet hedging involves making changes in the on-balance-sheet assets and liabilities to protect the FI's profits from FX risk and taking positions in forward or other derivative securities to hedge FX risk. A)True B)False Q3) Assume an Australian FI has US$100 000 in assets and US$200 000 in liabilities.Further, the FI has bought US$40 000 and sold US$20 000.What is the net exposure of the Australian FI? A)-US$20 000 B)-US$80 000 C)US$20 000 D)US$80 000 To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Liquidity Risk Available Study Resources on Quizplus for this Chatper 65 Verified Questions 65 Flashcards Source URL: https://quizplus.com/quiz/65715
Sample Questions Q1) Consider the following hypothetical data: Sources of liquidity Total cash-type assets $3000 Maximum borrowed funds limit $22 000 Excess cash in exchange settlement account (ESA) $1000 Uses of liquidity Funds borrowed $12 500 ESA funds $500 What is the FI's net liquidity position? A)($12 500 + $500) - ($3000 + $22 000 + $1000) = -$13 000 B)($3000 + $22 000 + $1000) - ($12 500 + $500) = $13 000 C)($12 500 - $500) = $13 000 D)($3000 + $22 000 + $1000) = $26 000 Q2) Discuss the advantages and disadvantages of stored liquidity management and purchased liquidity management.In your opinion, which is the better approach for a DI to adopt? To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Liability and Liquidity Management Available Study Resources on Quizplus for this Chatper 66 Verified Questions 66 Flashcards Source URL: https://quizplus.com/quiz/65714
Sample Questions Q1) Managing liabilities as a means of managing liquidity risk involves the trade-off between lower funding cost and higher risk of withdrawals. A)True B)False Q2) Covered bonds are issued by: A)NBFIs and must have a pool of assets covering the bonds that meet 105 per cent of the face value of the outstanding covered bonds. B)depository institutions and must have a pool of assets covering the bonds that meet 105 per cent of the face value of the outstanding covered bonds. C)by depository institutions and must have a pool of assets covering the bonds that meet 100 per cent of the face value of the outstanding covered bonds. D)depository institutions and must have a pool of assets covering the bonds that meet 103 per cent of the face value of the outstanding covered bonds. Q3) Why have regulators of financial service firms in Australia introduced the deposit guarantee programs? Why may regulators seek to provide greater protection to depositors than to other DI creditors? To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Off-Balance-Sheet Activities Available Study Resources on Quizplus for this Chatper 65 Verified Questions 65 Flashcards Source URL: https://quizplus.com/quiz/65713
Sample Questions Q1) Which of the following situation is similar to the externality effect? A)Exercising an adverse material change in conditions clause as a last resort, thereby cancelling or repricing a loan commitment. B)Increase in the cost of funds above normal levels while many FIs scramble for funds to meet their commitments to customers during a credit crunch. C)In a loan commitment, the borrower takes down only part of the funds over the specified time-period. D)The buyer of a commercial letter of credit fails to perform as promised under a contractual obligation. Q2) Under an interest rate cap, in return for a fee the seller promises to compensate the buyer should interest rates remain under a certain level. A)True B)False Q3) Which of the following statements is true? A)When issued trading can expose FIs to future interest rate risk. B)When issued trading can expose FIs to future credit risk. C)When issued trading can expose FIs to future liquidity risk. D)When issued trading can expose FIs to future default risk. To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Technology and Other Operational Risk Available Study Resources on Quizplus for this Chatper 67 Verified Questions 67 Flashcards Source URL: https://quizplus.com/quiz/65712
Sample Questions Q1) To offset costs arising from operational risks, FI managers spend considerable efforts on the following: A)Loss prevention, loss control, loss financing and loss insulation. B)Loss prevention, loss control, loss investment and loss insulation. C)Loss provisioning, loss control, loss financing and loss insulation. D)Loss prevention, loss control, loss financing and loss creation. Q2) Regulators have proposed that operational risk should be measured for the purpose of meeting overall capital adequacy. A)True B)False Q3) Specific problems that can create employee risk include: A)War; external fraud. B)Management information. C)Money laundering; rogue trading and fraud risk D)Taxation risk; confidentiality breach Q4) Cost inefficiencies related to managerial performance and other hard-to-quantify factors are also called X-inefficiencies. A)True B)False To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Capital Management and Adequacy Available Study Resources on Quizplus for this Chatper 66 Verified Questions 66 Flashcards Source URL: https://quizplus.com/quiz/65711
Sample Questions Q1) Total capital (Tier 1 capital plus Tier 2 capital) must be at least ______ of risk-weighted assets at all times: A)9 per cent B)7.5 per cent C)8 per cent D)4.5 per cent Q2) Which of the following is true? A)Total capital is the sum of Tier I and Tier II capital less deductions. B)Total capital must equal or exceed 8 per cent of risk-weighted assets. C)The total of Tier II capital is limited to 100 per cent of Tier I capital. D)All of the listed options are correct. Q3) To calculate the operational risk capital charge, the DI's activities are first divided into: A)investment banking, commercial banking and 'all other activity'. B)commercial lending, retail lending and 'all other activity'. C)derivative trading, foreign exchange trading and 'all other activity'. D)retail banking, commercial banking and 'all other activity'. Q4) What are the major differences between the Basel I and the Basel II approaches to capital regulation? Q5) Why is a regulatory capital charge against operational risk necessary? Page 20 To view all questions and flashcards with answers, click on the resource link above.