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Unformatted text preview: FI 350 Test II Study Guide Chapter 10 - Chapter 14 These questions are in addition to the problems at the end of each chapter. I may change the numbers in calculation problems, so you should understand how to work them. In addition, I may change the order of answers and one incorrect answer. Good luck! Chapter 10 The investment maturity strategy which calls for the bank to have one half of its investment portfolio in very short term assets and one half of its investment portfolio in long term assets is known as the _________________________ . A(n) _________________________ is a security where the interest portion of the security is sold separately from the principal portion of the security. _________________________ are the way the federal, state and local governments guarantee the safety of their deposits with banks. _________________________ is the risk that the bank will have to sell part of its investment portfolio before their maturity for a capital loss. A money market security which represents a bank's commitment to pay a stipulated amount of money on a specific future date under specific conditions and which is often used in international trade is known as a(n) _________________________. Securities sold by Fannie Mae, Freddie Mac and others are known as _________________________. are time deposits of fixed maturity in US dollars issued by the world’s largest banks headquartered in financial centers around the globe. The heart of this market is centered in London. is the risk that loans will be terminated or paid off ahead of schedule. This is a particular problem with residential home mortgages and other consumer loans that are pooled and used as collateral in securitized assets. An important investment security popular with banks that must by law mature within one year from the date of issue and which has a high degree of safety and marketability is the: A) Treasury bill B) Treasury note C) FNMA note D) Bankers' acceptance E) Eurodollar CD Packages of high-quality mortgages put together either by a government agency or by a private investment banking corporation to raise more loanable funds for the issuer are known as a (or an): A) Accretion bond B) Participation certificate C) CMO D) Stripped security E) Commercial paper 61. _____________ is the method by which banks can provide a safeguard for the deposits of governmental units. A) Hedging B) Collateralization C) Pledging D) Securitization E) Window dressing The most aggressive investment maturity strategy that calls for the bank to continually shift the maturities of its securities in response to changes in interest rates and other economic conditions is the A) Barbell strategy B) Rate expectations approach C) Front-end-loaded policy D) Ladder approach E) None of the above Which of the following statements is (are) correct regarding duration?...
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This note was uploaded on 06/09/2011 for the course ACCOUNTING ACG2021 taught by Professor Balmori during the Winter '09 term at Miami Dade College, Miami.
- Winter '09
- The Land