Question 1

A consumer lending function is performed by each of the following FIs EXCEPT

Accepted Answer

A) mutual funds. 
B) finance companies. 
C) pension funds. 
D) deposit-taking institutions. 
E) insurance companies. 
A) mutual funds. 
B) finance companies. 
C) pension funds. 
D) deposit-taking institutions. 
E) insurance companies.

Question 2

All credit unions are nationally chartered and regulated by the Office of the Superintendent of Financial Institutions.

Accepted Answer

A) True 
 B)False

Question 3

The growth of the commercial paper market has led to a decline in the demand for business loans from commercial banks.

Accepted Answer

A) True 
 B)False

Question 4

As with other DTIs, profits or return on assets (ROA) is the primary goal of credit union management.

Accepted Answer

A) True 
 B)False

Question 5

In recent years, the number of banks in Canada has been increasing.

Accepted Answer

A) True 
 B)False

Question 6

Although growing, the notional value of bank OBS activities remained less than the value of on-balance-sheet activities at the end of 2012.

Accepted Answer

A) True 
 B)False

Question 7

The use of off-balance-sheet activities allows banks to practice regulatory tax-avoidance.

Accepted Answer

A) True 
 B)False

Question 8

Customer deposits are classified on a DTI's balance sheet as

Accepted Answer

A) assets, because the DTI uses deposit funds to earn profits. 
B) liabilities, because the DTI uses deposits as a source of funds. 
C) assets, because customers view deposits as assets. 
D) liabilities, because the DTI must meet reserve requirements on customer deposits. 
E) liabilities, because DTIs are required to serve depositors. 
A) assets, because the DTI uses deposit funds to earn profits. 
B) liabilities, because the DTI uses deposits as a source of funds. 
C) assets, because customers view deposits as assets. 
D) liabilities, because the DTI must meet reserve requirements on customer deposits. 
E) liabilities, because DTIs are required to serve depositors.

Question 9

The credit union industry avoided much of the financial distress of the 1980s because of the short maturity and relatively lower credit risk of their assets.

Accepted Answer

A) True 
 B)False

Question 10

The securitization of mortgages involves the pooling of mortgage loans for sale in the financial markets.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following observations concerning credit unions is NOT true?

Accepted Answer

A) They invest heavily in corporate securities. 
B) Member loans constitute a majority of their total assets. 
C) They tend to invest more of their assets in Government of Canada securities than other DTIs. 
D) They engage in off-balance-sheet activities. 
E) They focus more on providing services and less on profitability. 
A) They invest heavily in corporate securities. 
B) Member loans constitute a majority of their total assets. 
C) They tend to invest more of their assets in Government of Canada securities than other DTIs. 
D) They engage in off-balance-sheet activities. 
E) They focus more on providing services and less on profitability.

Question 12

The maturity structure of the assets of banks tends to be shorter than the maturity structure of liabilities.

Accepted Answer

A) True 
 B)False

Question 13

Credit unions make proportionately larger amounts of real estate loans than large Canadian banks.

Accepted Answer

A) True 
 B)False

Question 14

The largest liability on Canadian banks' balance sheet as of April 30, 2013 was

Accepted Answer

A) investment securities. 
B) deposits. 
C) mortgages and loans payable. 
D) borrowings. 
E) cash. 
A) investment securities. 
B) deposits. 
C) mortgages and loans payable. 
D) borrowings. 
E) cash.

Question 15

Lehman Brothers failed during the recent financial crisis despite having access to the low cost sources of funds offered by the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 16

Regulator forbearance is a policy of allowing economically insolvent FIs to continue in operation.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is the most important source of funds for credit unions?

Accepted Answer

A) Borrowings from the Bank of Canada. 
B) Savings deposits from small consumers. 
C) Repurchase agreements. 
D) Interbank borrowing. 
E) Wholesale deposits. 
A) Borrowings from the Bank of Canada. 
B) Savings deposits from small consumers. 
C) Repurchase agreements. 
D) Interbank borrowing. 
E) Wholesale deposits.

Question 18

Credit unions operate on a common bond principle which emphasizes the deposit-taking and lending needs of credit union members.

Accepted Answer

A) True 
 B)False

Question 19

A major difference between banks and other nonfinancial firms is the low amount of leverage in commercial banks.

Accepted Answer

A) True 
 B)False

Question 20

Commercial banks that have invested in Internet and mobile banking services and products have significantly outperformed those banks that have chosen to avoid these markets.

Accepted Answer

A) True 
 B)False

Exam 2: Deposit-Taking Institutions

A consumer lending function is performed by each of the following FIs EXCEPT

All credit unions are nationally chartered and regulated by the Office of the Superintendent of Financial Institutions.

The growth of the commercial paper market has led to a decline in the demand for business loans from commercial banks.

As with other DTIs, profits or return on assets (ROA) is the primary goal of credit union management.

In recent years, the number of banks in Canada has been increasing.

Although growing, the notional value of bank OBS activities remained less than the value of on-balance-sheet activities at the end of 2012.

The use of off-balance-sheet activities allows banks to practice regulatory tax-avoidance.

Customer deposits are classified on a DTI's balance sheet as

The credit union industry avoided much of the financial distress of the 1980s because of the short maturity and relatively lower credit risk of their assets.

The securitization of mortgages involves the pooling of mortgage loans for sale in the financial markets.

Which of the following observations concerning credit unions is NOT true?

The maturity structure of the assets of banks tends to be shorter than the maturity structure of liabilities.

Credit unions make proportionately larger amounts of real estate loans than large Canadian banks.

The largest liability on Canadian banks' balance sheet as of April 30, 2013 was

Lehman Brothers failed during the recent financial crisis despite having access to the low cost sources of funds offered by the Federal Reserve.

Regulator forbearance is a policy of allowing economically insolvent FIs to continue in operation.

Which of the following is the most important source of funds for credit unions?

Credit unions operate on a common bond principle which emphasizes the deposit-taking and lending needs of credit union members.

A major difference between banks and other nonfinancial firms is the low amount of leverage in commercial banks.

Commercial banks that have invested in Internet and mobile banking services and products have significantly outperformed those banks that have chosen to avoid these markets.

Why Are Financial Institutions Special

Finance Companies

Securities, Brokerage, and Investment Banking

Mutual Funds, Hedge Funds, and Pension Funds

Insurance Companies

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loans

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

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization Index

Filters