Bank assets tend to have _____________ maturities and _____________ liquidity than/as bank liabilities. longer; greater longer; lower shorter; greater shorter; lower equal; equal
The allowance for loan and lease losses is bank management's estimate of the amount of gross loans and leases that will not be repaid to the bank.
True/FalseTrueThe provision for loan loss account is the actual loan losses less loan recoveries in a given time period.
True/FalseFalseLoans to consumers and to individuals are jointly termed C&I loans on a bank's balance sheet.
True/FalseFalseWhat is the largest operating expense for a bank?
Employee salaries
Interest paid on loans from Federal Reserve
Interest paid on deposits
Interest paid on loans borrowed from other banks
Employee benefitsInterest paid on depositsA bank can raise capital by:
offering long-term CDs.
issuing stock.
retaining earnings.
both issuing stocks and offering long-term CDs.
both issuing stocks and retaining earnings.both issuing stocks and retaining earnings.Investment securities plus ____________________ is equal to a bank's earning assets.
net loans and leases
gross loans and leases
property, plant, and equipment
securities held for trading
purchased accountsnet loans and leasesThe largest source of income at a typical bank is:
interest income on securities held for sale.
interest income on securities held for investment.
interest income on loans and leases.
noninterest income.
dividends or stock.interest income on loans and leases.U.S. depository institutions may be subject to as many as ______________ separate regulators.
four
five
six
seven
eightfourFDIC deposit insurance is generally limited to ________________ per depositor per bank.
$50,000
$100,000
$150,000
$200,000
$250,000$250,000Areas of commercial bank regulation dealing with preventing banks from discriminating unfairly in lending are termed ______________________ regulations.
safety and soundness
consumer protection
investor protection
credit allocation
monetary policyconsumer protectionTier I (core) capital includes at least some part of which of the following?
I. Common stockholders' equity
II. Retained earnings
III. Subordinated debt
IV. Allowance for loan and lease lossesI and IIThe layers of regulation imposed on banks to protect depositors against bank failure are termed credit allocation regulations.
True/FalseFalseThe Glass-Steagall Act came about due to concerns about excessive risk taking at banks and conflicts of interest between commercial and investment banking activities.
True/FalseTrueThe 1993 Basel Agreement explicitly incorporated the different credit risks of assets into capital adequacy measures.
True/FalseTrueIn the United States, commercial banks are among the least regulated financial institutions.
True/FalseFalseDiversified full-line securities firms engage in all but which one of the following?
Trading and brokerage of existing securities
Corporate restructuring and advice
Issuing new securities
Raising money via insured depositsRaising money via insured depositsUnderwriting new securities issuance requires that the investment bank:
buys the issue at a certain price and then sells it in the primary market.
provides research and legal advice only to the issuing company.
buys the issue at a certain price and then sells it in the secondary market.
provides its best effort to sell the securities and the unsold portion goes back to the issuer.
purchases securities in the secondary market when they are undervalued.buys the issue at a certain price and then sells it in the primary market.When the investment banker sells the new securities on commission without guaranteeing the sale of the whole issue, the process is called:
private placement.
best effort.
brokered sale.
underwriting.
syndicate offering.best effort.Security dealers who will buy or sell securities at any time in the market are called:
brokers.
program traders.
underwriters.
market makers.
dealers.market makersAn investment bank agrees to pay $26.75 for 5 million shares of a company in a firm commitment stock offering. It then can sell those shares to the public for $25.50 per share. What is the profit to the investment bank?
Profit of $6,250,000
Loss of $6,250,000
Loss of $5,000,000
Loss of $7,500,000
Profit of $1,000,000Loss of $6,250,000Firms underwriting securities assist corporate clients in selling them in secondary markets.
True/FalseFalseAn advantage of private placements is that there is no requirement to register with the SEC since the placements are made only to large, sophisticated investors; therefore, the cost of issuance is lower.
True/FalseTrueHedge funds charge expense fees and performance fees. The average performance fee on hedge funds is ____________.
5 percent
10 percent
15 percent
20 percent
25 percent20 percentActively managed funds find it difficult to consistently earn higher risk-adjusted returns than a broad stock market index. The difference in return between actively managed funds and passively managed index funds can be explained by which of the following?
I. Lower expense ratios for index funds
II. Higher turnover ratios for index funds
III. Differences in returns in sectors of the market and the overall market returnI and IIIBy type of fund, there are more ______________ funds than any other.
equity
bond
taxable money market
tax-exempt money market
hybridequityThe market value of a mutual fund's assets divided by the number of fund shares outstanding is equal to the:
load charge.
NAV.
expense ratio.
12b-1 fee.
management fee.NAVWhich one of the following fund types is likely to have the lowest annual expense ratio?
Index funds
Equity funds
Bond funds
Balanced funds
Hybrid fundsIndex fundsETFs are private investment pools, which are exempt from SEC regulations and have the ability to pursue diverse investment choices.
True/FalseFalseThe price of an ETF is determined once a day when the market closes.
True/FalseFalseLoad funds charge one-time sales commissions that can be paid either upfront or at end of the investing period in the mutual fund.
True/FalseTrue
