Question 1

Commercial banks take part in the money markets as:

Accepted Answer

A)  lenders of funds only. 
B)  borrowers of funds only. 
C)  both lenders and borrowers of funds. 
D)  underwriters only. 
A)  lenders of funds only. 
B)  borrowers of funds only. 
C)  both lenders and borrowers of funds. 
D)  underwriters only. C

Question 2

Which of the following features is a role of a bank?

Accepted Answer

A)  Attracting funds from the capital markets to facilitate borrowing by the household sector 
B)  Facilitating the flow of funds from borrowers to lenders 
C)  Facilitating the flow of funds from savers to borrowers 
D)  Managing the level of interest rates 
A)  Attracting funds from the capital markets to facilitate borrowing by the household sector 
B)  Facilitating the flow of funds from borrowers to lenders 
C)  Facilitating the flow of funds from savers to borrowers 
D)  Managing the level of interest rates C

Question 3

Which of the following statements about regulatory capital is false?

Accepted Answer

A)  Tier 1 capital includes paid-up ordinary shares, retained earnings, non-cumulative irredeemable preference shares and general reserves. 
B)  Tier 2 capital includes general provision for doubtful debts, revaluation reserves of premises, mandatory convertible notes and approved perpetual subordinated debt. 
C)  Tier 1 capital is core capital, including paid-up ordinary shares, non-cumulative irredeemable preference shares and general reserves. 
D)  Tier 2 capital includes general reserves for doubtful debts, asset revaluation reserves of premises, other preference shares, mandatory convertible notes, cumulative redeemable preference shares and perpetual subordinated debt. 
A)  Tier 1 capital includes paid-up ordinary shares, retained earnings, non-cumulative irredeemable preference shares and general reserves. 
B)  Tier 2 capital includes general provision for doubtful debts, revaluation reserves of premises, mandatory convertible notes and approved perpetual subordinated debt. 
C)  Tier 1 capital is core capital, including paid-up ordinary shares, non-cumulative irredeemable preference shares and general reserves. 
D)  Tier 2 capital includes general reserves for doubtful debts, asset revaluation reserves of premises, other preference shares, mandatory convertible notes, cumulative redeemable preference shares and perpetual subordinated debt. D

Question 4

All of the following are off-balance-sheet transactions of a bank except:

Accepted Answer

A)  documentary letters of credit. 
B)  performance guarantees. 
C)  underwriting facilities. 
D)  bills receivable. 
A)  documentary letters of credit. 
B)  performance guarantees. 
C)  underwriting facilities. 
D)  bills receivable.

Question 5

Deregulation of the banking sector throughout the late 1970s and the 1980s sought to:

Accepted Answer

A)  reduce the reliance of major Australian companies on international capital markets. 
B)  reduce the excess profits of banks. 
C)  reduce the discrimination against banks owing to direct controls on them only. 
D)  provide reduced control on the money supply. 
A)  reduce the reliance of major Australian companies on international capital markets. 
B)  reduce the excess profits of banks. 
C)  reduce the discrimination against banks owing to direct controls on them only. 
D)  provide reduced control on the money supply.

Question 6

Which of the following is NOT associated with the purpose of regulating financial institutions?

Accepted Answer

A)  Providing stability of the money supply 
B)  Directing flow of funds to priority areas 
C)  Maintaining the soundness and stability of the financial system 
D)  Lowering the cost of funds 
A)  Providing stability of the money supply 
B)  Directing flow of funds to priority areas 
C)  Maintaining the soundness and stability of the financial system 
D)  Lowering the cost of funds

Question 7

Which of the following statements about deposits is correct?

Accepted Answer

A)  Call accounts represent a fluctuating source of funds for banks. 
B)  Term deposits are funds lodged with a bank for longer than two weeks. 
C)  As current accounts are highly liquid, they form an unstable source of funds for a bank. 
D)  A cheque account may pay interest. 
A)  Call accounts represent a fluctuating source of funds for banks. 
B)  Term deposits are funds lodged with a bank for longer than two weeks. 
C)  As current accounts are highly liquid, they form an unstable source of funds for a bank. 
D)  A cheque account may pay interest.

Question 8

A bank provides a loan of $1 million to a company that has an A rating.Calculate the dollar value of capital required under the capital adequacy requirements to support the facility.

Accepted Answer

A)  $16 000 
B)  $40 000 
C)  $80 000 
D)  $120 000 
A)  $16 000 
B)  $40 000 
C)  $80 000 
D)  $120 000

Question 9

Which of the following is generally a highly liquid instrument?

Accepted Answer

A)  A bank bill 
B)  A certificate of deposit 
C)  Neither a bank bill nor a certificate of deposit 
D)  Both bank bills and certificates of deposit are liquid instruments 
A)  A bank bill 
B)  A certificate of deposit 
C)  Neither a bank bill nor a certificate of deposit 
D)  Both bank bills and certificates of deposit are liquid instruments

Question 10

Some of the elements in assessing capital adequacy requirements for banks under the Basel II capital accord are:

Accepted Answer

A)  credit risk, liquidity risk and interest rate risk. 
B)  credit risk, market risk and type of capital held. 
C)  default risk, interest rate risk and market risk. 
D)  default risk, liquidity risk and type of capital held. 
A)  credit risk, liquidity risk and interest rate risk. 
B)  credit risk, market risk and type of capital held. 
C)  default risk, interest rate risk and market risk. 
D)  default risk, liquidity risk and type of capital held.

Question 11

In the Basel II standardised approach to external rating grades,the asset counterparty weights for capital adequacy guidelines are:

Accepted Answer

A)  10%, 20%, 50% and 100%. 
B)  10%, 50%, 100% and 150%. 
C)  20%, 50%, 100% and 150%. 
D)  20%, 50%, 100% and 200%. 
A)  10%, 20%, 50% and 100%. 
B)  10%, 50%, 100% and 150%. 
C)  20%, 50%, 100% and 150%. 
D)  20%, 50%, 100% and 200%.

Question 12

Commercial banks are the main type of financial institution in a financial system because they hold the largest amounts of financial assets.

Accepted Answer

A) True 
 B)False

Question 13

All of the following financial securities are considered 'uses of funds' by banks except:

Accepted Answer

A)  commercial bills. 
B)  credit cards. 
C)  certificates of deposit. 
D)  overdrafts. 
A)  commercial bills. 
B)  credit cards. 
C)  certificates of deposit. 
D)  overdrafts.

Question 14

Which of the following statements about commercial lending is incorrect?

Accepted Answer

A)  The term loan is the main type of lending provided by banks to firms. 
B)  Typically, term loans are for maturities ranging from 5 to 15 years. 
C)  To extend commercial bill financing a bank may provide the firm with a rollover facility. 
D)  Banks can provide flexible funding called an overdraft to firms. 
A)  The term loan is the main type of lending provided by banks to firms. 
B)  Typically, term loans are for maturities ranging from 5 to 15 years. 
C)  To extend commercial bill financing a bank may provide the firm with a rollover facility. 
D)  Banks can provide flexible funding called an overdraft to firms.

Question 15

Part of a bank's liquidity management is to hold a portfolio of:

Accepted Answer

A)  term loans. 
B)  mortgages. 
C)  Commonwealth government securities. 
D)  credit card loans. 
A)  term loans. 
B)  mortgages. 
C)  Commonwealth government securities. 
D)  credit card loans.

Question 16

For a commercial bank's market discipline,the capital adequacy guidelines for its disclosure and transparency requirements fall under:

Accepted Answer

A)  Pillar 1. 
B)  Pillar 2. 
C)  Pillar 3. 
D)  Pillar 4. 
A)  Pillar 1. 
B)  Pillar 2. 
C)  Pillar 3. 
D)  Pillar 4.

Question 17

Briefly discuss the sources of funds for a commercial bank.

Accepted Answer

Commercial banks obtain funds from vario

Question 18

For banks,liability management refers to:

Accepted Answer

A)  managing the liabilities of the banks; that is, the loans. 
B)  banks ensuring they have sufficient funds by managing their deposit base. 
C)  managing the real assets, the bank buildings. 
D)  protecting the loans and other commitments by using derivatives. 
A)  managing the liabilities of the banks; that is, the loans. 
B)  banks ensuring they have sufficient funds by managing their deposit base. 
C)  managing the real assets, the bank buildings. 
D)  protecting the loans and other commitments by using derivatives.

Question 19

Which of the following statements about recently adopted guidelines covering capital requirements for market risk that banks are required to perform is false?

Accepted Answer

A)  Banks use a risk measurement model based on a VaR approach. 
B)  Banks estimate the sensitivity of portfolio components to small changes in prices. 
C)  Banks must hold capital against risk of loss from changes in interest rates. 
D)  Banks hold a fixed allocation of funds between various balance sheet assets and off-balance-sheet business. 
A)  Banks use a risk measurement model based on a VaR approach. 
B)  Banks estimate the sensitivity of portfolio components to small changes in prices. 
C)  Banks must hold capital against risk of loss from changes in interest rates. 
D)  Banks hold a fixed allocation of funds between various balance sheet assets and off-balance-sheet business.

Question 20

Foreign currency liabilities have increased in importance as a source of funds for Australian banks.Which of the following statements is NOT a major reason?
i.deregulation of the foreign exchange market
ii.diversification of funding sources
iii.demand from multinational corporate clients
iv.internationalisation of global financial markets
v.avoidance of the non-callable deposit prudential requirement
vi.expansion of banks' asset-base denominated in foreign currencies

Accepted Answer

A)  v 
B)  ii 
C)  i 
D)  All of the given answers are correct. 
A)  v 
B)  ii 
C)  i 
D)  All of the given answers are correct.

Commercial banks take part in the money markets as:

Which of the following features is a role of a bank?

Which of the following statements about regulatory capital is false?

All of the following are off-balance-sheet transactions of a bank except:

Deregulation of the banking sector throughout the late 1970s and the 1980s sought to:

Which of the following is NOT associated with the purpose of regulating financial institutions?

Which of the following statements about deposits is correct?

A bank provides a loan of $1 million to a company that has an A rating.Calculate the dollar value of capital required under the capital adequacy requirements to support the facility.

Which of the following is generally a highly liquid instrument?

Some of the elements in assessing capital adequacy requirements for banks under the Basel II capital accord are:

In the Basel II standardised approach to external rating grades,the asset counterparty weights for capital adequacy guidelines are:

Commercial banks are the main type of financial institution in a financial system because they hold the largest amounts of financial assets.

All of the following financial securities are considered 'uses of funds' by banks except:

Which of the following statements about commercial lending is incorrect?

Part of a bank's liquidity management is to hold a portfolio of:

For a commercial bank's market discipline,the capital adequacy guidelines for its disclosure and transparency requirements fall under:

Briefly discuss the sources of funds for a commercial bank.

For banks,liability management refers to:

Which of the following statements about recently adopted guidelines covering capital requirements for market risk that banks are required to perform is false?

A Modern Financial System: An Overview

Non-Bank Financial Institutions

The Share Market and the Corporation

Corporations Issuing Equity in the Share Market

Investors in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

Government Debt, monetary Policy and the Payments System

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

Filters

Exam 2: Commercial Banks

Commercial banks take part in the money markets as:

Which of the following features is a role of a bank?

Which of the following statements about regulatory capital is false?

All of the following are off-balance-sheet transactions of a bank except:

Deregulation of the banking sector throughout the late 1970s and the 1980s sought to:

Which of the following is NOT associated with the purpose of regulating financial institutions?

Which of the following statements about deposits is correct?

A bank provides a loan of $1 million to a company that has an A rating.Calculate the dollar value of capital required under the capital adequacy requirements to support the facility.

Which of the following is generally a highly liquid instrument?

Some of the elements in assessing capital adequacy requirements for banks under the Basel II capital accord are:

In the Basel II standardised approach to external rating grades,the asset counterparty weights for capital adequacy guidelines are:

Commercial banks are the main type of financial institution in a financial system because they hold the largest amounts of financial assets.

All of the following financial securities are considered 'uses of funds' by banks except:

Which of the following statements about commercial lending is incorrect?

Part of a bank's liquidity management is to hold a portfolio of:

For a commercial bank's market discipline,the capital adequacy guidelines for its disclosure and transparency requirements fall under:

Briefly discuss the sources of funds for a commercial bank.

For banks,liability management refers to:

Which of the following statements about recently adopted guidelines covering capital requirements for market risk that banks are required to perform is false?

A Modern Financial System: An Overview

Non-Bank Financial Institutions

The Share Market and the Corporation

Corporations Issuing Equity in the Share Market

Investors in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

Government Debt, monetary Policy and the Payments System

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

Filters