Bank Balance Sheet

Assets

Cash 150,000

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Deposits at Fed 200,000

Loans 650,000

Total Assets 1,000,000

Liabilities and O.E

Deposits 1,000,000

Total L and O.E 1,000,000

what is the total minimum amount of cash and reserves that this bank must have is (the Fed Reserve Requirement Ratio is 10%)

 

An increase in ________ decreases the money supply since it causes the ________ to fall.

  1. A) reserve requirements; money multiplier
  2. B) reserve requirements; monetary base
  3. C) margin requirements; monetary base
  4. D) margin requirements; money multiplie

 

You will not lose money from the following position if the underlying asset falls in value:

  1. sell a forward
  2. write a call
  3. buy a put
  4. the buyer of a futures contract

 

What is stock Repurchase?

 

In which type of hedge would a wheat farmer be interested?

  1. A long hedge-buy wheat futures contracts as a hedge against a decline in the price of wheat
  2. A short hedge-sell wheat futures contracts as a hedge against a decline in the price of wheat
  3. A short hedge-sell wheat futures contracts as a hedge against an increase in the price of wheat
  4. A long hedge-buy wheat futures contracts as a hedge against an increase in the price of wheat

 

Yield and risk relationship?

 

A bank recently purchased a t-bill futures contract to hedge a risk position at the bank. If the price of the futures contract is increasing, assuming a perfect hedge will the bank have loses or gains?

 

When discount rate is lower, what happens?

 

The economic policies designed to take the economy out of the recession are

 

Venture capital is not?

  1. a share of capital appreciation.
  2. substantial control over management decisions.
  3. no protection against downside risk.
  4. Serves as intermediate
  5. all above are correct

 

Compared to finance companies, commercial banks generally have a _______ loan delinquency rate, and the average interest rate charged on loans is _______ on average.

a.higher; lower

b.lower; higher

c.higher; higher

d.lower; lower

 

which is not correct about Full-service brokerage firms?

  1. They derive only a small percentage of their revenues from commissions
  2. Provide advice over investment retirement planning, tax tips
  3. facilitating trades, managing portfolios, financial planning, and wealth management services
  4. all the above is true

 

If the U.S. government imposed trade restrictions on U.S. imports, this would __________ the U.S. supply of U.S. dollars and would place __________ pressure on the values of foreign currencies (with respect to the dollar).​

  1. increase; downward
  2. increase; upward
  3. reduce; downward
  4. limit; upward

 

Which one of the following statements concerning financial futures is correct?

  1. A) Speculators in the currency markets are generally firms involved with international trading of goods and services.
  2. B) Portfolio managers wishing to provide downside protection to their portfolios are the primary speculators in the financial futures markets.
  3. C) Investors who simply play in the futures market with the hope of realizing capital gains are referred to as the hedgers.
  4. D) International trade often is accompanied by currency hedging via financial futures.

 

What is sub-prime mortgage loan?

 

Which of the following actions would the Fed wish to take in order to increase the money supply?

  1. Purchase treasury bonds
  2. Increase government spending
  3. Reduce tax rates
  4. Sell treasury bonds

 

What is Moral Hazard?

 

What is Insider trading ?

 

What is principal-agent problem ?

 

Bank Balance Sheet Bank

Assets

Cash     $1M

Reserves $4M

Agency Securities 10

Loans 5M

Total Assets 20 M

Liabilities and O.E 

Deposits 7M

Long term debt 3 M

Equity RE 6

Loan loss Reserves 4

Total L and O.E 20M

What is the bank’s Capital?

What is the bank’s Tier-2 Capital ?

 

Securitization refers to:

  1. a) combining several loans or other financial assets into a bundle and then selling that bundle in whole or in parts to financial investors.
  2. b) ensuring that the lending institution is stable.
  3. c) combining several loans or other financial assets into a bundle and then making sure that the bundle has sufficient collateral.
  4. d) making sure that a loan has sufficient collateral.

 

The role of the credit Ratings Agencies (Moody’s Investors Service, Standard & Poor’s and Fitch Ratings).

 

+/-asset-liability gapWhat is its relationship to Interest?

 

If an investor buys a T-bill with a 120-day maturity and $50,000 par value for $48,500 and holds it to maturity, what is the annualized yield?

 

What is ETF?

 

What are the monetary policy tools?

 

Financial institutions with _________ interest rate-sensitive liabilities than assets are ___________ affected by rising interest rates.

  1. A) more; adversely
  2. B) fewer; adversely
  3. C) more; favorably
  4. D) none of the above

 

What is Dual Banking System?

 

What is Loan Loss Provision? 

 

In a period when interest rates are expected to rise, __________ institutions will want a fixed-for-floating swap, and the fixed rate specified on interest rate swaps will be __________ under these conditions.

  1. A) many; lower
  2. B) many; higher
  3. C) few; lower
  4. D) few; higher

 

If interest rates _______ and bond prices ______, short positions in T-bond futures will _____ value and long positions will _____ value.

  1. fall; rise; lose; gain
  2. rise; fall; lose; gain
  3. fall; fall; gain; lose
  4. rise; fall; gain; lose
  5. Both (A) and (D)

 

If an international bank attempts to reduce its foreign currency exposure by replacing long-term foreign government securities with domestic floating-rate commercial loans, it is likely that the bank’s:

a.default risk would decrease and liquidity risk would decrease

b.default risk would increase and liquidity risk would increase

c.default risk would increase and liquidity risk would decrease

d.default risk would decrease and liquidity risk would increase

 

Which of the following was not a reason for the saving institution crisis? 

 

  1. a decline in interest rates
  2. losses on loans and securities
  3. fraud
  4. illiquidity due to high interest rates
  5. bankruptcy of one of the leading financial institutions

 

 

Which of the following is false about the bid/ask spread on currency quotations?

  1. Currencies for countries with frequent political risks (i.e., the country risk of the currency is high) will have smaller bid/ask spread.
  2. The more intense the competition for the traded currency, the smaller the bid/ask spread is.
  3. The higher the inventory costs, the larger the bid/ask spread is.
  4. The larger the order costs, the larger the bid/ask spread is.

 

From the perspective of the lender, adjustable rate mortgages ______ of rising interest rates on a typical savings institution’s spread.

a.increase the adverse impact

  1. reduce the adverse impact

c.increase the adverse impact

d.reduce the adverse impact

 

Profitable companies have high ROE T or F ?

 

What is Underwritten offer ?

 

Which of the following statements about discount rate and Federal Funds is/are not true?

  1. The federal funds rate is a primary barometer of Fed policy reported in the media.
  2. A lower discount rate encourages banks to borrow reserves and make loans
  3. A higher discount rate discourages banks to borrow reserves and make loans
  4. A higher discount rate encourages banks to borrow reserves and make loans

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