Question 1

The Financial Services Modernization Act repealed the Glass-Steagall barriers between commercial banking and investment banking.

Accepted Answer

A) True 
 B)False

Question 2

Interstate banking barriers have deteriorated in part because of the decisions to deal with the failing thrift industry by allowing acquiring firms to cross state lines.

Accepted Answer

A) True 
 B)False

Question 3

The Herfindahl-Hirschman Index (HHI) is a measure of

Accepted Answer

A) market concentration. 
B) profitability. 
C) market performance. 
D) annual sector growth. 
E) investor reaction. 
A) market concentration. 
B) profitability. 
C) market performance. 
D) annual sector growth. 
E) investor reaction.

Question 4

What is the market share of Bank 2? $$\begin{array} { | c | r | } 
\hline \text { Bank } & \text { Asset Size } \
\hline 1 & \text { \$100 million } \
\hline 2 & \text { \$200 million } \
\hline 3 & \text { \$500 million } \
\hline
\end{array}$$

Accepted Answer

A) 12.5 percent. 
B) 37.5 percent. 
C) 25.0 percent. 
D) 62.5 percent. 
E) 50.0 percent. 
A) 12.5 percent. 
B) 37.5 percent. 
C) 25.0 percent. 
D) 62.5 percent. 
E) 50.0 percent.

Question 5

An underwriter is quoting the following rates for the issue of new securities on behalf of a firm on a firm commitment basis: $64.00-64.25.2,000,000 shares are being offered.

Accepted Answer

A) The maximum amount that can be earned by the underwriter (ignoring other costs) $1,000,000. 
B) The maximum amount that can be earned by the underwriter (ignoring other costs) is $500,000. 
C) The minimum amount that can be earned (ignoring other costs) by the underwriter is $0. 
D) The minimum amount that can be earned (ignoring other costs) by the underwriter is -$500,000. 
E) The minimum amount that can be earned (ignoring other costs) by the underwriter is -$1,000,000. 
A) The maximum amount that can be earned by the underwriter (ignoring other costs) $1,000,000. 
B) The maximum amount that can be earned by the underwriter (ignoring other costs) is $500,000. 
C) The minimum amount that can be earned (ignoring other costs) by the underwriter is $0. 
D) The minimum amount that can be earned (ignoring other costs) by the underwriter is -$500,000. 
E) The minimum amount that can be earned (ignoring other costs) by the underwriter is -$1,000,000.

Question 6

Which of the following items has not been a factor in the erosion of interstate banking restrictions?

Accepted Answer

A) The purchase of troubled banks. 
B) The establishment of nonbank banks. 
C) The Bank Holding Company Act Amendments of 1970. 
D) The expansion of OBHC activities. 
E) The establishment of regional and national banking pacts. 
A) The purchase of troubled banks. 
B) The establishment of nonbank banks. 
C) The Bank Holding Company Act Amendments of 1970. 
D) The expansion of OBHC activities. 
E) The establishment of regional and national banking pacts.

Question 7

Which of the following is an advantage to an FI of expanding globally?

Accepted Answer

A) Exposure to nationalization or expropriation. 
B) Economies of scale. 
C) High fixed costs. 
D) Costs of complying with different regulatory requirements. 
E) Information and monitoring costs. 
A) Exposure to nationalization or expropriation. 
B) Economies of scale. 
C) High fixed costs. 
D) Costs of complying with different regulatory requirements. 
E) Information and monitoring costs.

Question 8

Prior to the International Banking Act of 1978, foreign banks operating with state licenses

Accepted Answer

A) were not subject to the Federal Reserve's reserve requirements. 
B) were not subject to interstate branching restrictions. 
C) were not subject to restrictions on corporate securities underwriting. 
D) All of the options. 
E) None of the options. 
A) were not subject to the Federal Reserve's reserve requirements. 
B) were not subject to interstate branching restrictions. 
C) were not subject to restrictions on corporate securities underwriting. 
D) All of the options. 
E) None of the options.

Question 9

What is seen as a reason for the increased expansion of foreign bank activities in the United States following the passage of the International Banking Act?

Accepted Answer

A) Access to the Federal Reserve's discount window, Fedwire, and FDIC insurance. 
B) Absence of the Federal Reserve's reserve requirements, audits, and exams. 
C) No interstate branching restrictions. 
D) No restrictions on corporate securities underwriting activities. 
E) Limited access to financial markets. 
A) Access to the Federal Reserve's discount window, Fedwire, and FDIC insurance. 
B) Absence of the Federal Reserve's reserve requirements, audits, and exams. 
C) No interstate branching restrictions. 
D) No restrictions on corporate securities underwriting activities. 
E) Limited access to financial markets.

Question 10

Of the ten largest financial service firms in the world, three are headquartered in the U.S.

Accepted Answer

A) True 
 B)False

Question 11

Section 20 affiliates allow banks to transact previously ineligible securities activities.

Accepted Answer

A) True 
 B)False

Question 12

Identify a condition under which conflicts of interest are exploitable.

Accepted Answer

A) Market for bank service is very competitive. 
B) Banks have monopoly power over their customers. 
C) Information flows between the customer and the bank are symmetric. 
D) Bank does not possess any information advantage over its customers. 
E) Bank places a relatively high value on its reputation. 
A) Market for bank service is very competitive. 
B) Banks have monopoly power over their customers. 
C) Information flows between the customer and the bank are symmetric. 
D) Bank does not possess any information advantage over its customers. 
E) Bank places a relatively high value on its reputation.

Question 13

The Pecora Commission's findings about the 1929 stock market crash resulted in the

Accepted Answer

A) Financial Services Modernization Act. 
B) Glass-Steagall Act. 
C) Federal Reserve Act. 
D) International Banking Act. 
E) Garn St.Germain Depository Institutions Act. 
A) Financial Services Modernization Act. 
B) Glass-Steagall Act. 
C) Federal Reserve Act. 
D) International Banking Act. 
E) Garn St.Germain Depository Institutions Act.

Question 14

Which of the following is true of X efficiencies?

Accepted Answer

A) They result from diseconomies of scope. 
B) They are difficult to pin down in a quantitative fashion. 
C) They result from diseconomies of scale. 
D) They are a direct result of significant economies of scope. 
E) They are a direct result of significant economies of scale. 
A) They result from diseconomies of scope. 
B) They are difficult to pin down in a quantitative fashion. 
C) They result from diseconomies of scale. 
D) They are a direct result of significant economies of scope. 
E) They are a direct result of significant economies of scale.

Question 15

Merger premiums tend to be higher for target banks in competitive environments, but for which the target bank's loan portfolios are of high quality.

Accepted Answer

A) True 
 B)False

Question 16

The purpose of the Foreign Bank Supervision Enhancement Act of 1991 was to extend federal authority over foreign banking organizations in the U.S.

Accepted Answer

A) True 
 B)False

Question 17

The barriers among nonbank financial service firms and commercial firms are generally much stronger than the barriers separating banking and commercial sector activities.

Accepted Answer

A) True 
 B)False

Question 18

The establishment of a presence in local markets by insurance companies is reasonably inexpensive because of low capital requirements established by state regulators.

Accepted Answer

A) True 
 B)False

Question 19

The first regional banking pact in the U.S.was in

Accepted Answer

A) the Southeast. 
B) New England. 
C) the Northwest. 
D) the Southwest. 
E) the Midwest. 
A) the Southeast. 
B) New England. 
C) the Northwest. 
D) the Southwest. 
E) the Midwest.

Question 20

Which of the following is not a reasonable argument for the increase in the number of banks that can compete in security underwriting activities?

Accepted Answer

A) Small firms gain increased access to the capital markets. 
B) Lower commission and fee expense for firms issuing securities. 
C) Issuing firms realize an increase in the degree of underpricing of new issues. 
D) The market for securities underwriting will see a decline in market concentration. 
E) More competition will increase the new issue proceeds to the issuing firm. 
A) Small firms gain increased access to the capital markets. 
B) Lower commission and fee expense for firms issuing securities. 
C) Issuing firms realize an increase in the degree of underpricing of new issues. 
D) The market for securities underwriting will see a decline in market concentration. 
E) More competition will increase the new issue proceeds to the issuing firm.

Exam 22: Product and Geographic Expansion

The Financial Services Modernization Act repealed the Glass-Steagall barriers between commercial banking and investment banking.

Interstate banking barriers have deteriorated in part because of the decisions to deal with the failing thrift industry by allowing acquiring firms to cross state lines.

The Herfindahl-Hirschman Index (HHI) is a measure of

What is the market share of Bank 2? Bank Asset Size 1 \1 00 million 2 \2 00 million 3 \5 00 million

An underwriter is quoting the following rates for the issue of new securities on behalf of a firm on a firm commitment basis: $64.00-64.25.2,000,000 shares are being offered.

Which of the following items has not been a factor in the erosion of interstate banking restrictions?

Which of the following is an advantage to an FI of expanding globally?

Prior to the International Banking Act of 1978, foreign banks operating with state licenses

What is seen as a reason for the increased expansion of foreign bank activities in the United States following the passage of the International Banking Act?

Of the ten largest financial service firms in the world, three are headquartered in the U.S.

Section 20 affiliates allow banks to transact previously ineligible securities activities.

Identify a condition under which conflicts of interest are exploitable.

The Pecora Commission's findings about the 1929 stock market crash resulted in the

Which of the following is true of X efficiencies?

Merger premiums tend to be higher for target banks in competitive environments, but for which the target bank's loan portfolios are of high quality.

The purpose of the Foreign Bank Supervision Enhancement Act of 1991 was to extend federal authority over foreign banking organizations in the U.S.

The barriers among nonbank financial service firms and commercial firms are generally much stronger than the barriers separating banking and commercial sector activities.

The establishment of a presence in local markets by insurance companies is reasonably inexpensive because of low capital requirements established by state regulators.

The first regional banking pact in the U.S.was in

Which of the following is not a reasonable argument for the increase in the number of banks that can compete in security underwriting activities?

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Securities Brokerage and Investment Banking

Financial Services: Mutual Funds and Hedge Funds

Financial Services: Insurance

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loan Risk

Credit Risk: Loan Portfolio and Concentration Risk

Liquidity Risk

Foreign Exchange Risk

Sovereign Risk

Market Risk

Off-Balance-Sheet Risk

Technology and Other Operational Risks

Fintech Risks

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

Filters