Final Exam
3 Pages

Final Exam

Course Number: FIN 486, Spring 2012

College/University: University of Phoenix

Word Count: 801

Rating:

Document Preview

FIN366 Final Exam 1) Demand deposits represent the largest deposit source of funds for commercial banks. 2) Property/casualty insurers have a tax incentive to hold preferred stock. 3) a. b. c. d. Which statement is not true about casualty insurance companies? they are subject to federal income tax. they invest heavily in municipal bonds. they have more predictable cash flows related to claims than life...

Unformatted Document Excerpt
Coursehero >> Arizona >> University of Phoenix >> FIN 486

Course Hero has millions of student submitted documents similar to the one
below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.

Course Hero has millions of student submitted documents similar to the one below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.

Final FIN366 Exam 1) Demand deposits represent the largest deposit source of funds for commercial banks. 2) Property/casualty insurers have a tax incentive to hold preferred stock. 3) a. b. c. d. Which statement is not true about casualty insurance companies? they are subject to federal income tax. they invest heavily in municipal bonds. they have more predictable cash flows related to claims than life insurance companies. they invest in corporate stock. 4) The Glass-Steagall Act of 1933 separated a. insurance from credit. b. investment banking from mutual funds. c. investment banking from commercial banking. d. insurance from mutual funds. 5) The primary reason for the decline of the S&L industry was the passage of legislation that gave commercial lending powers to the S&L industry. 6) An insurance policy in which fixed premium payments are invested in mutual funds of stocks, bonds, and money market instruments is called a. term life. b. universal life. c. whole life. d. endowment life. e. variable life. 7) The Fed can substantially control the level of total bank reserves. 8) Which Fed action does not directly increase total reserves in the banking system? a. Lowering the Discount Rate b. Lowering reserve requirements c. Buying U.S. Government securities on the open market d. None of the above 9) a. b. c. d. Deposits tend to expand whenever: reserve requirements decrease. the public holds more cash. reserve requirements increase. monetary policy tightens. 10) Interest rates and the money supply tend to vary inversely, at least in the short term. 11) A role of the central bank is to provide liquidity and prevent panic. 12) Individuals have an advantage over FIs in that individuals more easily can diversify away some of the credit risk of their asset portfolios. 13) Foreign exchange risk is that the value of assets and liabilities may change because of changes in the level of interest rates. 14) The maturity of a portfolio of assets or liabilities is a weighted average of the maturities of the assets or liabilities that comprise that portfolio. 15) Because of its simplicity, smaller depository institutions still use this model as their primary measure of interest rate risk. a. The repricing model b. The maturity model c. The duration model d. The convexity model e. The option pricing model 16) Marking -to-market accounting is a market value accounting method that reflects the prices of assets and liabilities when purchased. 17) Price volatility a of bond can be estimated by multiplying the bonds modified duration by the adverse daily yield move. 18) What is defined as the risk related to the uncertainty of an FIs earnings on its trading portfolio caused by changes, and particularly extreme changes in market conditions? a. Interest rate risk b. Credit risk c. Sovereign risk d. Market risk e. Default risk 19) Federal Reserve open market operations, reserve requirement changes, and discount rate policy first impact the economy in the money market. 20) Which statement about Treasury bills is not true? a. They have maturities less than one year. b. Most are sold by "book-entry" method. c. They are sold at a discount. d. Interest on T-bills is tax-deductible for federal income tax purposes. 21) Money market securities are all debt securities, while capital market securities are either debt or equity securities. 22) The biggest supplier of funds in the capital markets are a. financial institutions b. state and local governments c. federal government d. households and non-profit organizations 23) An ARM, compared to a FRM, shifts the interest rate risk from the borrower to the lender. 24) What is the monthly payment on a $200,000 conventional fixed-rate mortgage, 7 percent, financed for 15 years? a. $1830 b. $1798 c. $1679 d. $1721 25) Weak U. S. dollar will lead to increased foreign demand for U.S goods. 26) Exchange rates are influenced by a. trade flows. b. financial flows. c. government intervention. d. all of the above. 27) The Edge Act of 1919 permitted U.S. banks to create international banking facilities. 28) Which of the following is not a reason for the rapid expansion of U.S. banks overseas? a. the establishment of the Edge Act b. overall expansion of U.S. world trade c. the growth of multinational corporations d. restrictions on outflow of funds from the U.S. e. the International Bank Act of 1978 29) Which of the following is associated with the currency risk of international lending by a U.S. bank? a. The Spanish borrower is slow to pay the U.S. bank. b. The U.S. bank is paid dollars by its foreign borrowers. c. A U.S. bank receives an interest payment from a French borrower paid in Euros. d. A U.S. bank holds a mortgage on property in a country in the middle of a civil war. 30) In the middle part of the twentieth century, large banks addressed the issue of interstate branch banking restrictions by forming multibank holding companies with bank subsidiaries in different states.
MOST POPULAR MATERIALS FROM FIN 486
MOST POPULAR MATERIALS FROM FIN
MOST POPULAR MATERIALS FROM University of Phoenix