Question 1

Which of the following statements is NOT correct?

Accepted Answer

A) A mutual-to-stock conversion allows savings institutions (SIs)to obtain additional capital by issuing stock. 
B) Because of their ownership structure, mutual SIs are more susceptible to unfriendly takeovers. 
C) When a mutual SI is involved in an acquisition, it first converts to a stock-owned SI. 
D) Consolidation and acquisitions have caused the number of mutual and stock SIs to decline consistently over the years. 
A) A mutual-to-stock conversion allows savings institutions (SIs)to obtain additional capital by issuing stock. 
B) Because of their ownership structure, mutual SIs are more susceptible to unfriendly takeovers. 
C) When a mutual SI is involved in an acquisition, it first converts to a stock-owned SI. 
D) Consolidation and acquisitions have caused the number of mutual and stock SIs to decline consistently over the years. B

Question 2

During the credit crisis of 2008-2009, some credit unions suffered losses on second mortgages and home-equity loans that they had provided, and some credit unions experienced losses on mortgage-backed securities in which they had invested.

Accepted Answer

A) True 
 B)False  True

Question 3

The maximum insurance per depositor provided by the National Credit Union Share Insurance Fund is

Accepted Answer

A) $250,000. 
B) $50,000. 
C) $40,000. 
D) $25,000. 
A) $250,000. 
B) $50,000. 
C) $40,000. 
D) $25,000. A

Question 4

Adjustable-rate mortgages ____  the adverse impact of rising interest rates on a typical savings institution's spread. They ____ the favorable impact of declining interest rates on the spread. ​

Accepted Answer

A) reduce; reduce 
B) reduce; increase 
C) increase; increase 
D) increase; reduce 
A) reduce; reduce 
B) reduce; increase 
C) increase; increase 
D) increase; reduce

Question 5

____ risk is probably the least concern for savings institutions.

Accepted Answer

A) Liquidity 
B) Exchange rate 
C) Credit 
D) Interest rate 
A) Liquidity 
B) Exchange rate 
C) Credit 
D) Interest rate

Question 6

Today, savings institutions are not permitted to invest in junk bonds.

Accepted Answer

A) True 
 B)False

Question 7

The ____ acts as a temporary lender to credit unions.

Accepted Answer

A) World Bank 
B) Central Liquidity Facility 
C) Federal Home Loan Bank 
D) National Credit Union Administration 
A) World Bank 
B) Central Liquidity Facility 
C) Federal Home Loan Bank 
D) National Credit Union Administration

Question 8

When savings institutions are unable to attract sufficient deposits, they can

Accepted Answer

A) borrow in the federal funds market. 
B) borrow from the Federal Reserve. 
C) borrow through a repurchase agreement. 
D) All of these are correct. 
A) borrow in the federal funds market. 
B) borrow from the Federal Reserve. 
C) borrow through a repurchase agreement. 
D) All of these are correct.

Question 9

The primary use of credit union funds is

Accepted Answer

A) loans to credit union members. 
B) the purchase of government securities. 
C) the purchase of agency securities. 
D) the purchase of corporate bonds. 
E) None of these are correct. 
A) loans to credit union members. 
B) the purchase of government securities. 
C) the purchase of agency securities. 
D) the purchase of corporate bonds. 
E) None of these are correct.

Question 10

If a credit union's members are affiliated with a particular employer and large layoffs occur, the credit union's exposure to ____ risk may increase .

Accepted Answer

A) settlement 
B) interest rate 
C) credit 
D) None of these are correct. 
A) settlement 
B) interest rate 
C) credit 
D) None of these are correct.

Question 11

The sensitivity of the cost of funds to interest rate movements has generally been

Accepted Answer

A) greater for credit unions than for savings institutions. 
B) greater for credit unions than for commercial banks. 
C) lower for credit unions than for savings institutions or commercial banks. 
D) similar for credit unions as for savings institutions and commercial banks. 
A) greater for credit unions than for savings institutions. 
B) greater for credit unions than for commercial banks. 
C) lower for credit unions than for savings institutions or commercial banks. 
D) similar for credit unions as for savings institutions and commercial banks.

Question 12

____ is (are)not a main use of funds for savings institutions.

Accepted Answer

A) Capital 
B) Mortgages 
C) Consumer and commercial loans 
D) Mortgage-backed securities 
A) Capital 
B) Mortgages 
C) Consumer and commercial loans 
D) Mortgage-backed securities

Question 13

Savings institutions can obtain capital by

Accepted Answer

A) issuing stock. 
B) repurchasing stock. 
C) borrowing from the Federal Reserve. 
D) borrowing in the federal funds market. 
A) issuing stock. 
B) repurchasing stock. 
C) borrowing from the Federal Reserve. 
D) borrowing in the federal funds market.

Question 14

A savings institution's cash flows are ____ interest rate movements.

Accepted Answer

A) positively related to 
B) inversely related to 
C) unrelated to 
D) None of these are correct. 
A) positively related to 
B) inversely related to 
C) unrelated to 
D) None of these are correct.

Question 15

Which of the following are NOT a deposit source of funds for savings institutions?

Accepted Answer

A) passbook savings accounts 
B) retail CDs 
C) money market funds 
D) negotiable order of withdrawal (NOW)accounts 
E) All of these are deposit sources of funds for savings institutions. 
A) passbook savings accounts 
B) retail CDs 
C) money market funds 
D) negotiable order of withdrawal (NOW)accounts 
E) All of these are deposit sources of funds for savings institutions.

Question 16

A contract that allows for the purchase of a specified debt security for a specified price at a future point in time is known as a(n)

Accepted Answer

A) interest rate futures contract. 
B) interest rate swap contract. 
C) interest rate cap contract. 
D) security swap contract. 
A) interest rate futures contract. 
B) interest rate swap contract. 
C) interest rate cap contract. 
D) security swap contract.

Question 17

____ are nonprofit organizations composed of members with a common bond.

Accepted Answer

A) Credit unions 
B) Savings banks 
C) Savings and loan associations 
D) Commercial banks 
A) Credit unions 
B) Savings banks 
C) Savings and loan associations 
D) Commercial banks

Question 18

Savings institutions commonly ____ to reduce their risk.

Accepted Answer

A) purchase futures contracts on stock indexes 
B) purchase futures contracts on Treasury bonds 
C) sell futures contracts on stock indexes 
D) sell futures contracts on Treasury bonds 
A) purchase futures contracts on stock indexes 
B) purchase futures contracts on Treasury bonds 
C) sell futures contracts on stock indexes 
D) sell futures contracts on Treasury bonds

Question 19

Which of the following is NOT an advantage of credit unions?

Accepted Answer

A) They can offer attractive rates to their members because they are nonprofit and therefore are not taxed. 
B) Their noninterest expenses are relatively low, because their offices and furniture are often donated or provided at a very low cost through the affiliation of their members. 
C) Their large membership allows them to effectively diversify geographically. 
D) All of these are advantages of credit unions. 
A) They can offer attractive rates to their members because they are nonprofit and therefore are not taxed. 
B) Their noninterest expenses are relatively low, because their offices and furniture are often donated or provided at a very low cost through the affiliation of their members. 
C) Their large membership allows them to effectively diversify geographically. 
D) All of these are advantages of credit unions.

Question 20

During the credit crisis of 2008-2009, savings institutions experienced all of the following EXCEPT

Accepted Answer

A) high default rates on loans to finance leveraged buyouts. 
B) a decline in the level of mortgage originations. 
C) high default rates on subprime mortgages. 
D) losses on investments in mortgage-backed securities. 
A) high default rates on loans to finance leveraged buyouts. 
B) a decline in the level of mortgage originations. 
C) high default rates on subprime mortgages. 
D) losses on investments in mortgage-backed securities.

Exam 21: Thrift Operations

Which of the following statements is NOT correct?

During the credit crisis of 2008-2009, some credit unions suffered losses on second mortgages and home-equity loans that they had provided, and some credit unions experienced losses on mortgage-backed securities in which they had invested.

The maximum insurance per depositor provided by the National Credit Union Share Insurance Fund is

Adjustable-rate mortgages ____ the adverse impact of rising interest rates on a typical savings institution's spread. They ____ the favorable impact of declining interest rates on the spread. ​

____ risk is probably the least concern for savings institutions.

Today, savings institutions are not permitted to invest in junk bonds.

The ____ acts as a temporary lender to credit unions.

When savings institutions are unable to attract sufficient deposits, they can

The primary use of credit union funds is

If a credit union's members are affiliated with a particular employer and large layoffs occur, the credit union's exposure to ____ risk may increase .

The sensitivity of the cost of funds to interest rate movements has generally been

____ is (are)not a main use of funds for savings institutions.

Savings institutions can obtain capital by

A savings institution's cash flows are ____ interest rate movements.

Which of the following are NOT a deposit source of funds for savings institutions?

A contract that allows for the purchase of a specified debt security for a specified price at a future point in time is known as a(n)

____ are nonprofit organizations composed of members with a common bond.

Savings institutions commonly ____ to reduce their risk.

Which of the following is NOT an advantage of credit unions?

During the credit crisis of 2008-2009, savings institutions experienced all of the following EXCEPT

Role of Financial Markets and Institutions

Determination of Interest Rates

Structure of Interest Rates

Functions of the Fed

Monetary Policy

Money Markets

Bond Markets

Bond Valuation and Risk

Mortgage Markets

Stock Offerings and Investor Monitoring

Stock Valuation and Risk

Market Microstructure and Strategies

Financial Futures Markets

Options Markets

Swap Markets

Foreign Exchange Derivative Markets

Commercial Bank Operations

Bank Regulation

Bank Management

Bank Performance

Finance Company Operations

Mutual Fund Operations

Securities Operations

Insurance and Pension Fund Operations

Pension Fund Operations

Filters

Adjustable-rate mortgages the adverse impact of rising interest rates on a typical savings institution's spread. They the favorable impact of declining interest rates on the spread.