Management of Financial Institutions true or false exercises | FIN 4323, Exams of Finance

Download Management of Financial Institutions true or false exercises | FIN 4323 and more Exams Finance in PDF only on Docsity! Management of Financial Institutions, Fin 4323-001 fall 2000 Hein, Exam #2 Form #1 1. True or false: Settlement risk refers to the risk that a payment made during the day is not fulfilled by the end of the day. This risk is greatest using the Clearing House InterBank Payments System (CHIPS), as opposed to the Fedwire. a. True. b. False. 2. Which of the following would not be an off-balance sheet activity that must be reported on the bank’s schedule L? a. Loan Commitments. b. Commercial letters of credit. c. Loan sales without recourse. d. Futures contracts. e. When issued securities. 3. At least four types of risk are associated with loan commitments. Which of the following is not one of these types of risk? a. Interest rate risk. b. Settlement risk. c. Takedown risk. d. Credit risk. e. Aggregate funding risk. 4. When a financial intermediary enters into a commitment to buy or sell securities before they have been issued, this is best referred to as which of the following? a. When issue trading. b. A letter of credit c. A standby letter of credit. d. Loan sale with recourse. e. Loan sale without recourse. 5. Which of the following are standardized contracts guaranteed by an organized exchange? a. When issued trading. b. A forward contract. c. A futures contract. d. Loan sale with recourse. e. Loan sale without recourse. 6. True or false: Off-balance sheet activities will always lead to added risk for a financial intermediary. a. True. b. False. 7. Which of the following organizations is in favor of a proposed accounting change that would require all assets to be valued according to their current market value, in what has become known as “fair value accounting?” a. The American Bankers Association. b. The Financial Accounting Standards Board (FASB). c. The Basle Committee on Banking Supervision. d. The Federal Reserve Board. 8. From Labor Day this year to October 6, 2000, returns on the NASDAQ were closest to which of the following? a. 30%. b. 10%. c. 0%. d. –1%. e. –20%. 9. Of the following three US stock indexes, which has shown the steepest decline since the beginning of the year? a. The Dow Jones Industrial Average. b. The S&P 500. c. The NASDAQ. d. The Nikkei index 10. True or false: The US labor report released the first part of October suggests that the US economy was stronger than previously anticipated. a. True. b. False. 11. True or false: The loan portfolio risks generally will be less than the individual loan risks combined. a. True. b. False. 12. True or False: Higher reserve requirements will increase a banks’ contractually promised gross return on a loan when a bank requires compensating balances. a. True. b. False. 13. Which is NOT one of the 5 C’s of credit that should be included in a qualitative credit analysis? a. Character. b. Capital. c. Collateral. d. Compensating Balances. 14. In dollar terms, which category of loans makes up the largest percentage of U.S. bank loans as of January 1998? a. Commercial and Industrial. b. Real Estate. c. Individual. d. Other. 15. True or False: The prime rate is the lowest rate available to the bank’s most creditworthy borrowers. a. True. b. False. 16. According to FASB 115, a bank must classify its investments into one of three categories. Which of the following is not one of those categories? a. Held to maturity. b. Available for sale. c. Trading. d. Off-balance sheet items. 17. True or False: Most commercial loans are made under loan commitments. a. True. b. False. 18. Which is an example of a revolving loan? a. Home mortgages. b. Credit Card Debt. c. Spot loans. d. Secured loan. 19. True or False: An increase in the bank’s contractually promised gross return on a loan will always lead to an increase in the bank’s expected return on a loan. a. True. b. False. 20. When a lender makes a certain amount of credit available and the borrower has the option to take down any amount up to that limit, this is best referred to as which of the following? a. Stupid banking. b. A secured loan. c. A loan commitment. d. A mortgage. e. A compensating balance. 21. True or false: The notional value of a futures contract far exceeds the risk exposure of this derivative position.