Exam - cribME

1 ExamName_____MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the ) So-called fallen angels differ from junk bonds in thatA)junk bonds have ratings below Baa, whereas fallen angels have ratings below )junk bonds refer to previously bonds that have had their credit ratings fall below Baa,whereas fallen angels refer to newly issued bonds with low credit ) fallen angels have ratings below Baa, whereas junk bonds have ratings below )junk bonds refer to newly issued bonds with low credit ratings, whereas fallen angels refer topreviously bonds that have had their credit ratings fall below )2) Because of the abuses by state banks and the clear need for a central bank to help the federalgovernment raise funds during the War of 1812, Congress created theA) Second Bank of North America in ) Bank of United States in ) Second Bank of the United States in ) Bank of North America in )3) Thrift institutions' importance as a source of funds for borrowersA)

2 Has shrunk from over 20 percent of total credit advanced in the late 1970s to below 10 percentby ) has shrunk from around 40 percent of total credit advanced in the late 1970s to below 30percent by ) has expanded dramatically, from around 15 percent of total credit advanced in the late 1970sto above 30 percent by ) has expanded dramatically, from around 15 percent of total credit advanced in the late 1970sto above 25 percent by )4) Reasons for holding Eurodollars includeA) the fact that Eurodollar deposits are insured by the ) the fact that Eurodollar deposits are heavily ) the fact that minimum transaction sizes are very low, making Eurodollars an attractivesavings instrument for ) the fact that dollars are widely used to conduct international ) all of the above )5) The regulatory agency responsible for supervising savings and loans institutions is theA) ) ) Federal Home Loan Bank ) Comptroller of the )16) Avoiding reserves requirements would enable banks toA) increase interest ) reduce ) increase ) all of )both A and C of the )7) One factor contributing to the decline in income advantages that banks once had is the increasedcompetition from the commercial paper market which has grown from _____ percent ofcommercial and industrial bank loans to over _____ percent ) 10; 20B) 10; 40C) 5; 20D) 5; 407)8) Which of the following is not a reason for the rapid expansion of international banking?

3 A) The growth of multinational corporationsB) The desire for banks to expandC) The rapid growth in international tradeD) None of the above8)9) The declining cost of computer technology has made _____ a )brick and mortar bankingB) international bankingC) investment bankingD) commercial bankingE) virtual banking9)10) Creating a marketable capital market instrument by bundling a portfolio of mortgage or auto loansisA) ) ) ) ) optioning the )11) The business term for economies of scope isA) ) ) ) economies of ) )212) Bank regulatory agencies includeA) the Federal Reserve ) the Federal Deposit Insurance ) the Comptroller of the ) all of the )both A and B of the )13) Which of the following are true statements concerning shared electronic banking facilities?A) Most courts and states have held that electronic bank facilities are technically subject tobranching ) If an electronic facility is paid for on a transaction fee basis, it is not considered a branch bank,and is therefore not subject to branching ) McFadden Act restrictions do not apply to electronic facilities owned outright by ) All of the above are ) Only A and B of the above are )14) Large fluctuations in interest rates lead toA) greater interest-rate ) greater uncertainty about returns on ) substantial capital gains and losses to owners of ) all of the )15) As a result of restrictive banking regulations, the United StatesA) has banks that are quite large relative to those in other ) has too few banks when compared to other industrialized ) has too many banks when compared to other industrialized )both A and B of the )16) Benefits of nationwide banking will likely includeA) increased ) reduced bank ) increased diversification of banks' loan )

4 All of the )both B and C of the )317) An instrument developed to help investors and institutions hedge interest-rate risk isA) a call ) a mortgage-backed ) a Treasury ) a put ) a financial )18) Banks responded to disintermediation byA) refusing to pay interest on ) demanding that interest rate regulations be imposed on money market mutual ) supporting the elimination of interest rate regulations, enabling them to better compete ) opposing the elimination of interest rate regulations, as this would increase their cost ) supporting the elimination of interest rate regulations, as this would reduce their cost )19) In 1977, he pioneered the concept of selling new public issues of junk bonds for companies that hadnot yet achieved investment-grade ) Carl IchanB) Ivan BoskeyC) Michael MilkenD) Roger Milliken19)20) Lack of competition in the United States banking industry can be attributed toA) recent legislation restricting ) the fact that branching has eliminated ) the fact that competition does not benefit ) nationalization of the banking ) nineteenth-century populist )4 Answer KeyTestname: PRACTICE_CH101) D2) C3) A4) D5) C6) E7) C8) D9) E10) D11) B12) D13) E14) D15) C16) D17) E18) C19) C20) E5