Which of the following can be used to increase the effective return on a loan?

a. higher lending standards

b. larger down payment

c. longer term

d. compensating balance

e. none of the above

This is a booking office for transactions located in a foreign country that has no contact with the public and is typically created to reduce tax liability.

a. a branch bank

b. an Edge Corporation

c a correspondent bank

d. a shell branch

e. a representative office

A bank loan manager who is expecting increasing interest rate levels over the next several years would encourage loan originators to make

a. variable rate loans.

b. loans closely tied to the prime rate.

c. fixedrate loans.

d. very shortterm loans

e. none of the above

The big advantage of allocating capital by markets rather than government administrators is that:

a. markets provide a top down interpretation of the economic environment that is more efficient

b. markets are less efficient but problems can be corrected with government regulations

c. markets are top down systems that aggregate information and result in more efficient decisions

d. markets are bottom up systems that aggregate information and result in more efficient decisions

e. markets have higher transaction costs that government administrator but are more efficient

Adverse selection is:

a. a kind of credit scoring model that can identify problem loans early

b. a type of problem in commercial bank lending that encourages risk taking

c. a circumstance that is frequently created by government policy that rewards the wrong party

d. a process that involves selecting the best credit risk from a sample of borrowers and identifying factors that aid in the process

e. none of the above

Generally, all lending except for this category of loans is essentially based on the anticipated future cash flow of the borrower:

a. real estate loans

b. personal loans

c. business or commercial and industrial loans

d. agricultural loans

e. student loans