Trading restrictions imposed on specific stocks or stock indices are referred to as Question 1 options: a) index busters. b) index options. c) circuit breakers. d) protective covenants. Save Question 2 (4 points) Question 2 Unsaved A bond index futures contract allows for the buying, but not the selling, of a bond index for a specified price at a specified date. Question 2 options: a) True b) False Save Question 3 (4 points) Question 3 Unsaved The futures price is mainly a function of the prevailing price of the underlying security plus an expected adjustment in that price by the settlement date. Question 3 options: a) True b) False Save Question 4 (4 points) Question 4 Unsaved The profits of a financial institution with interest-rate sensitive liabilities and interest rate-insensitive assets are ____ with hedging than without hedging if interest rates decrease. Question 4 options: a) higher b) the same c) lower d) higher or the same Save Question 5 (4 points) Question 5 Unsaved Speculators purchase currency ____ on currencies they expect to ____ against the dollar. Question 5 options: a) call options; weaken b) put options; strengthen c) futures; weaken d) put options; weaken Save Question 6 (4 points) Question 6 Unsaved An increase in uncertainty results in a higher implied standard deviation for the stock, which means that the writer of an option requires a higher premium to compensate for the anticipated increase in the stock's volatility. Question 6 options: a) True b) False Save Question 7 (4 points) Question 7 Unsaved The greater the volatility of the underlying stock, the ____ the call option premium and the ____ the put option premium. Question 7 options: a) higher; lower b) lower; higher c) higher; higher d) lower; lower Save Question 8 (4 points) Question 8 Unsaved A speculator purchases a put option for a premium of $4, with an exercise price of $30. The stock is presently priced at $29, and rises to $32 before the expiration date. What is the stock price at which the speculator would break even? Question 8 options: a) $26 b) $34 c) $28 d) $29 e) $32 Save Question 9 (4 points) Question 9 Unsaved A plain vanilla swap enables firms to exchange ____ for ____. Question 9 options: a) fixed rate payments; variable interest rate payments b) a high interest rate foreign currency; a low interest rate foreign currency c) a low interest rate foreign currency; a high interest rate foreign currency d) bonds; stocks that pay dividends Save Question 10 (4 points) Question 10 Unsaved An interest rate collar involves the purchase of an interest rate cap and the simultaneously sale of an interest rate floor. Question 10 options: a) True b) False Save Question 11 (4 points) Question 11 Unsaved In a(n) ____ swap, the fixed-rate payer makes a single payment at the maturity date of the swap agreement, while the floating-rate payer makes periodic payments throughout the swap period. Question 11 options: a) rate-capped b) zero-coupon-for-floating c) extendable d) callable Save Question 12 (4 points) Question 12 Unsaved An interest rate collar represents the ____ of an interest rate cap and a simultaneous ____ of an interest rate floor. Question 12 options: a) sale; sale b) sale; purchase c) purchase; purchase d) purchase; sale Save Question 13 (4 points) Question 13 Unsaved When the Federal Reserve attempt to lower interest rates by increasing the U.S. money supply, it puts upward pressure on the value of the dollar. Question 13 options: a) True b) False Save Question 14 (4 points) Question 14 Unsaved A country that pegs its currency does not have complete control over its local interest rates, as its interest rates must be aligned with the interest rates of the currency to which it is tied. Question 14 options: a) True b) False Save Question 15 (4 points) Question 15 Unsaved The exchange rate between two foreign (nondollar) currencies is known as a(n): Question 15 options: a) indirect dollar rate. b) forward rate. c) cross-exchange rate. d) derived exchange rate. Save Question 16 (4 points) Question 16 Unsaved Currency futures contracts differ from forward contracts in that they Question 16 options: a) are an obligation. b) are not an obligation. c) are standardized. d) can specify any amount and maturity date. Save Question 17 (4 points) Question 17 Unsaved For any given bank, federal funds ____ represent a(n) ____. Question 17 options: a) purchased; asset b) sold; liability c) purchased; liability d) A and B Save Question 18 (4 points) Question 18 Unsaved Obtaining funds through ____ is not a common source of funds for banks to satisfy a temporary deficiency of funds? Question 18 options: a) issuing bonds b) the federal funds market c) repurchase agreements d) borrowing from the Federal Reserve Save Question 19 (4 points) Question 19 Unsaved The Federal Reserve provides loans to banks in order to Question 19 options: a) resolve permanent shortages of funds experienced by banks. b) resolve temporary shortages of funds experienced by banks. c) finance the shortages of funds of finance companies. d) none of the above Save Question 20 (4 points) Question 20 Unsaved As a source of funds, small banks rely more heavily on ____, and larger banks rely more heavily on ____. Question 20 options: a) time deposits and foreign deposits; savings deposits and short-term borrowings b) savings deposits and short-term borrowings; foreign deposits and time deposits c) savings and time deposits; foreign deposits and short-term borrowings d) foreign deposits and short-term borrowings; savings and time deposits Save Question 21 (4 points) Question 21 Unsaved The key reason for regulatory examinations (such as CAMELS ratings) is to Question 21 options: a) rate past performance. b) detect problems of a bank in time to correct them. c) check for embezzlement. d) monitor reserve requirements. Save Question 22 (4 points) Question 22 Unsaved Bank regulations typically: Question 22 options: a) involve a tradeoff between the safety of the banking system and the efficiency of bank operations. b) impose restrictions on the types of assets in which banks can invest. c) set requirements for the minimum amount of capital that banks must hold. d) all of the above Save Question 23 (4 points) Question 23 Unsaved Which of the following is not a specific criterion the FDIC uses to monitor banks? Question 23 options: a) capital adequacy b) dollar value of fixed assets c) asset quality d) earnings e) sensitivity to financial market conditions Save Question 24 (4 points) Question 24 Unsaved Which banking act allowed for the creation of NOW accounts? Question 24 options: a) McFadden Act b) Glass-Steagall Act c) DIDMCA d) Garn-St. Germain Act Save Question 25 (4 points) Question 25 Unsaved An effective way to align bank managers interests with shareholders goal of higher returns is to compensate the managers with fixed salaries without a bonus. Question 25 options: a) True b) False Save Question 26 (4 points) Question 26 Unsaved Floating-rate loans completely eliminate interest rate risk. Question 26 options: a) True b) False Save Question 27 (4 points) Question 27 Unsaved ____ is not a method used to assess interest rate risk. Question 27 options: a) Gap analysis b) Ratio analysis c) Duration analysis d) Regression analysis e) All of the above are methods to assess interest rate risk. Save Question 28 (4 points) Question 28 Unsaved A gap ratio of less than one suggests that Question 28 options: a) rate-sensitive assets exceed rate-sensitive liabilities. b) an increase in interest rates would increase the bank's net interest margin. c) rate-sensitive liabilities exceed rate-sensitive assets. d) a decrease in interest rates would decrease the bank's net interest margin. e) B and D Save Question 29 (4 points) Question 29 Unsaved During the credit crisis, the level of ____ was much higher than in other periods. Question 29 options: a) interest income b) income expenses c) noninterest expenses d) loan loss provision Save Question 30 (4 points) Question 30 Unsaved Small banks tend to make more loans to small local businesses, and the rates on these loans are typically lower than the rates that larger banks charge on the loans they provide to large businesses. Question 30 options: a) True b) False Save Question 31 (4 points) Question 31 Unsaved Access to a bank's ROA without any other information reveals when its performance is not up to par and the reasons for its poor performance. Question 31 options: a) True b) False Save Question 32 (4 points) Question 32 Unsaved Bank X obtains most of its funds from NCDs, while Bank Y obtains much of its funds from passbook savings and from demand deposit accounts. Given this information, the net interest margin of Bank X would likely be ____ than that of Bank Y, and noninterest expenses would likely be ____ than that of Bank Y. Question 32 options: a) greater; greater b) greater; less c) less; less d) less; greater Save Question 33 (4 points) Question 33 Unsaved During the credit crisis of 20082009: Question 33 options: a) the Resolution Trust Corporation was formed to deal with insolvent savings institutions. b) several large savings institutions failed, including Countrywide Financial and Washington Mutual. c) savings institutions were insulated because their regulator subsidized any of them that experienced large loan defaults. d) the main problem for savings institutions was exposure to interest rate risk. Save Question 34 (4 points) Question 34 Unsaved Under the Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), all federally chartered savings institutions are to be regulated by the Federal Reserve, so these savings institutions no longer have an incentive to go regulator shopping. Question 34 options: a) True b) False Save Question 35 (4 points) Question 35 Unsaved Checkable accounts offered by credit unions are called Question 35 options: a) NOW accounts. b) money market deposit accounts. c) share certificates. d) share drafts. Save Question 36 (4 points) Question 36 Unsaved To obtain short-term funds, savings institutions commonly borrow funds in the ____ market. Question 36 options: a) stock b) bond c) mortgage d) federal funds e) futures Save Question 37 (4 points) Question 37 Unsaved Which of the following statements is incorrect? Question 37 options: a) A captive finance subsidiary's purpose is to finance sales of the parent company's products and services. b) An operating agreement between the parent and the captive specifies the type of receivables that qualify for same and specific services provided by the parent. c) A captive can be used to finance distributor or dealer inventories until a sale occurs. d) A captive is rarely used to finance products leased to others. Save Question 38 (4 points) Question 38 Unsaved ____ finance companies concentrate on purchasing credit contracts from retailers and dealers. Question 38 options: a) Consumer b) Sales c) Commercial d) None of the above Save Question 39 (4 points) Question 39 Unsaved Although commercial paper is available only for short-term financing, finance companies can continually roll over their issues to create a permanent source of funds. Question 39 options: a) True b) False Save Question 40 (4 points) Question 40 Unsaved Finance companies participate in the ____ market to reduce interest rate risk. Question 40 options: a) money b) bond c) options d) swap Save Question 41 (4 points) Question 41 Unsaved ____ are not exchange-traded funds. Question 41 options: a) Spiders b) Growth mutual funds c) Diamonds d) Sector Spiders Save Question 42 (4 points) Question 42 Unsaved The number of exchange-traded funds has declined over the last several years because the cost of managing them was excessive. Question 42 options: a) True b) False Save Question 43 (4 points) Question 43 Unsaved Mutual funds composed of stocks that have potential for very high growth, but may also be unproven, are called Question 43 options: a) income funds. b) capital appreciation funds. c) specialty funds. d) dividend funds. Save Question 44 (4 points) Question 44 Unsaved Because ____ real estate investment trusts essentially represent a fixed income portfolio, their market value will ____ as interest rates increase. Question 44 options: a) equity; increase b) equity; decrease c) mortgage; increase d) mortgage; decrease Save Question 45 (4 points) Question 45 Unsaved The ____ offers insurance on cash and securities deposited at brokerage firms. Question 45 options: a) Federal Reserve b) New York Stock Exchange c) Securities Investor Protection Corporation (SIPC) d) Securities and Exchange Commission (SEC) Save Question 46 (4 points) Question 46 Unsaved Securities firms commonly perform all of the following functions except for _____ when facilitating a secondary stock offering. Question 46 options: a) origination b) underwriting stock c) distribution of stock d) its own purchase of at least 20 percent of the offering Save Question 47 (4 points) Question 47 Unsaved Funds received from a bridge loan are commonly used to Question 47 options: a) purchase junk bonds. b) purchase high-grade corporate bonds. c) provide temporary financing for an acquisition. d) provide financing for individual investors that wish to purchase Treasury bonds. Save Question 48 (4 points) Question 48 Unsaved When the stock market is depressed, stock transactions tend to decline, causing a reduction in business for securities firms. This is an example of ____ risk. Question 48 options: a) interest rate b) credit c) market d) exchange rate Save Question 49 (4 points) Question 49 Unsaved A ____ plan allows a firm to know with certainty the amount of funds to contribute. The ____ plan allows a firm to know with certainty the amount of benefits that must be provided. Question 49 options: a) defined benefit; defined benefit b) defined contribution; defined contribution c) defined contribution; defined benefit d) defined benefit; defined contribution Save Question 50 (4 points) Question 50 Unsaved Which of the following is not a difference between PC insurance and life insurance? Question 50 options: a) PC policies often last ten years or more, as opposed to the short-term life insurance policies. b) PC insurance encompasses a wide variety of activities, while life insurance is more focused. c) Forecasting the amount of future compensation to be paid is more difficult for PC insurance than for life insurance. d) All of the above are differences between PC insurance and life insurance