Berger Test 1 Sample Questions & Answers 2012 Final

Berger Test 1 - Test 1 Sample Questions Answers Chapter 1 1 Give an example of a primary security invested in by FIs and an example of a secondary

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Chapter 1 1) Give an example of a primary security invested in by FIs and an example of a secondary security issued by FIs? (two answers) Primary- loans, stocks, bonds; Secondary- deposits, insurance policies. (4pts) 2) What is the maximum exposure of a bank to a single customer through loans, loan commitments, and other guarantees? 10% of bank equity. (2pts) 3) Give an example of a financial institution that was “too important to fail?” Bear Stearns, AIG, Citigroup, among others. (2pts) 4) In most cases, what does the diversification do to FI risk (Increase , decrease or keep the same )? Decrease. (2pts) 5) In terms of liquidity and price risk, how does a loan to a steel mill compare to a transactions deposit? (two answers) Loan to a steel mill (primary security) is less liquid and riskier than a transactions deposit (secondary security). (4pts) 6) What is one function of minimum capital requirements? A cushion to absorb losses, deter risk taking by reducing the moral hazard incentive. (2pts) 7) What is the Qualified Thrift Lender (QTL) Test?
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Requires thrifts to hold at least 65% of their assets in residential mortgage-related assets. (2pts) 8) What is the main incentive of banks to adhere to the Community Reinvestment Act? 9) How does the Riegle-Neal Act restrict the size of large banking organizations and what bank is currently constrained under this restriction? (two answers) Puts a 10% cap on national deposits that can be acquired through interstate mergers and acquisitions of commercial banks, Bank of America is currently over the 10% cap and cannot engage in further mergers with other commercial banks. (4pts) 10) Name the US banks in the top 10 banks in world (in terms of assets) as of September 2011. JP Morgan Chase. (2pts) 11) Name one thing that happened to Royal Bank of Scotland between 2009 and 2011? Assets declined from $3.5 trillion to $2 trillion, dropped from No. 1 to No. 6 in the world, and became UK government owned. (2pts) Chapter 2 12) Of Community , Regional , Super-regional and Money Center Banks , which one does JP Morgan Chase belong to? Money Center Bank. (2pts) 13) Name a product that was offered by depository financial institutions in 2010 that was not significantly offered in 1950.
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Off-balance-sheet activities (financial guarantees and derivatives); underwriting of debt and equity, insurance, and risk management products. (2pts) 14) Among Depository Institutions, what type is typically the largest? Commercial Banks.
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This note was uploaded on 02/17/2012 for the course FINA 465 taught by Professor Berger during the Spring '11 term at South Carolina.

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Berger Test 1 - Test 1 Sample Questions Answers Chapter 1 1 Give an example of a primary security invested in by FIs and an example of a secondary

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