FIN 390 FINAL EXAM QUESTIONS WITH VERIFIED
ACCURATE ANSWERS
Compared to banks and savings institutions, credit unions are able to pay a higher rate
on the deposits of members because
a. Regulation Q still applies to the industry.
b. of their tax-exempt status.
c. they intend to attract new members.
d. they are subject to the provisions of the Community Reinvestment Act.
e. they do not issue common stock. - Answers - b. of their tax-exempt status.
What is the defining characteristic of the dual banking system?
a. Nonbanking companies carrying out both banking and other activities.
b. Coexistence of both nationally chartered and state chartered banks.
c. Control of nationally chartered and state chartered banks by the state regulators.
d. Control of nationally chartered banks by both FRS and State bank regulators.
e. Coexistence of parent and holding companies. - Answers - b. Coexistence of both
nationally chartered and state chartered banks.
In what year did housing prices begin to deteriorate leading to a jump in defaults in the
subprime mortgage markets and the onset of the recent financial crisis?
a. 2010.
b. 2006.
c. 2003.
d. 2008.
e. 2001. - Answers - b. 2006.
Which of the following currently manages the insurance funds for both commercial
banks and savings institutions?
a. State authorities.
b. OCC.
c. FDIC.
d. FRS.
e. FSLIC. - Answers - c. FDIC.
Net regulatory burden for FIs is higher because regulators may require the FI to
a. produce less information than would be produced without regulation.
b. hold more debt than what would be held without regulation.
c. All of the options.
,d. hold more capital than what would be held without regulation.
e. hold fewer reserves than they would without regulation. - Answers - d. hold more
capital than what would be held without regulation.
Money center banks are considered to be any bank which
a. has corporate headquarters in either New York City, Chicago, San Francisco, Atlanta,
Dallas, or Charlotte.
b. does not participate in foreign currency markets.
c. is a net supplier of funds on the interbank market.
d. relies almost entirely on nondeposit and borrowed funds as sources of liabilities.
e. is not characterized by any of the above. - Answers - d. relies almost entirely on
nondeposit and borrowed funds as sources of liabilities.
Negative externalities exist in the depository sector when
a. lending activity is impaired or constrained.
b. the fear of DI insolvency leads to bank deposit runs.
c. All of the options.
d. there are delays in disbursements from insolvent DIs.
e. banks that are healthy suffer when another bank nears insolvency. - Answers - c. All
of the options.
A primary advantage for a depository institution of belonging to the Federal Reserve
System is
a. direct access to the discount window of the Fed.
b. decreased costs of regulatory compliance.
c. commission less trading of U.S. government securities.
d. the lower deposit reserves required under the Federal Reserve System.
e. direct access to correspondent banking services. - Answers - a. direct access to the
discount window of the Fed.
A company that provides financing to corporations, especially through equipment
leasing and factoring would best be categorized as a
a. sales finance institution.
b. personal credit institution.
c. loan shark.
d. business credit institution.
e. subprime lender. - Answers - d. business credit institution.
Which of the following is NOT true?
a. Finance companies rely on short-term commercial paper and long-term debt to
finance their assets.
, b. Finance companies are now the largest issuers of commercial paper in the U.S.
c. Finance companies rely on short-term commercial paper and customer deposits to
finance their assets.
d. The fastest growing area of finance companies in recent years has been in the area
of leasing and business loans.
e. Consumer loans represent the largest portion of the loan portfolio of finance
companies. - Answers - c. Finance companies rely on short-term commercial paper and
customer deposits to finance their assets.
Finance companies that prey on desperate higher-risk customers charging unfairly
exorbitant interest rates are referred to as
a. loan shark companies.
b. business credit companies.
c. refinancing companies.
d. personal credit companies.
e. captive companies. - Answers - a. loan shark companies.
What is the primary function of finance companies?
a. Make loans to both individuals and corporations.
b. Assist in the trading of securities in the secondary markets.
c. Extend loans to banks and other financial institutions.
d. Pool the financial resources of individuals and companies and invest in diversified
portfolios of assets.
e. Protect individuals and corporations from adverse events. - Answers - a. Make loans
to both individuals and corporations.
Finance companies charge different rates than do commercial banks which
a. All of the options.
b. causes some finance companies to be classified as subprime lenders.
c. tend to be higher than bank rates.
d. must meet state usury law guidelines.
e. often reflect a more risky borrower. - Answers - a. All of the options.
Finance companies often prefer to lease equipment to customers because
a. repossession in the event of default is easier and the finance company receives the
benefit of depreciation expense.
b. repossession in the event of default is easier.
c. the finance company receives the benefit of depreciation expense.
d. a lease with little or no down payment is more attractive to business customers.
e. All of the options. - Answers - e. All of the options.
Which of the following is NOT a type of finance company?
ACCURATE ANSWERS
Compared to banks and savings institutions, credit unions are able to pay a higher rate
on the deposits of members because
a. Regulation Q still applies to the industry.
b. of their tax-exempt status.
c. they intend to attract new members.
d. they are subject to the provisions of the Community Reinvestment Act.
e. they do not issue common stock. - Answers - b. of their tax-exempt status.
What is the defining characteristic of the dual banking system?
a. Nonbanking companies carrying out both banking and other activities.
b. Coexistence of both nationally chartered and state chartered banks.
c. Control of nationally chartered and state chartered banks by the state regulators.
d. Control of nationally chartered banks by both FRS and State bank regulators.
e. Coexistence of parent and holding companies. - Answers - b. Coexistence of both
nationally chartered and state chartered banks.
In what year did housing prices begin to deteriorate leading to a jump in defaults in the
subprime mortgage markets and the onset of the recent financial crisis?
a. 2010.
b. 2006.
c. 2003.
d. 2008.
e. 2001. - Answers - b. 2006.
Which of the following currently manages the insurance funds for both commercial
banks and savings institutions?
a. State authorities.
b. OCC.
c. FDIC.
d. FRS.
e. FSLIC. - Answers - c. FDIC.
Net regulatory burden for FIs is higher because regulators may require the FI to
a. produce less information than would be produced without regulation.
b. hold more debt than what would be held without regulation.
c. All of the options.
,d. hold more capital than what would be held without regulation.
e. hold fewer reserves than they would without regulation. - Answers - d. hold more
capital than what would be held without regulation.
Money center banks are considered to be any bank which
a. has corporate headquarters in either New York City, Chicago, San Francisco, Atlanta,
Dallas, or Charlotte.
b. does not participate in foreign currency markets.
c. is a net supplier of funds on the interbank market.
d. relies almost entirely on nondeposit and borrowed funds as sources of liabilities.
e. is not characterized by any of the above. - Answers - d. relies almost entirely on
nondeposit and borrowed funds as sources of liabilities.
Negative externalities exist in the depository sector when
a. lending activity is impaired or constrained.
b. the fear of DI insolvency leads to bank deposit runs.
c. All of the options.
d. there are delays in disbursements from insolvent DIs.
e. banks that are healthy suffer when another bank nears insolvency. - Answers - c. All
of the options.
A primary advantage for a depository institution of belonging to the Federal Reserve
System is
a. direct access to the discount window of the Fed.
b. decreased costs of regulatory compliance.
c. commission less trading of U.S. government securities.
d. the lower deposit reserves required under the Federal Reserve System.
e. direct access to correspondent banking services. - Answers - a. direct access to the
discount window of the Fed.
A company that provides financing to corporations, especially through equipment
leasing and factoring would best be categorized as a
a. sales finance institution.
b. personal credit institution.
c. loan shark.
d. business credit institution.
e. subprime lender. - Answers - d. business credit institution.
Which of the following is NOT true?
a. Finance companies rely on short-term commercial paper and long-term debt to
finance their assets.
, b. Finance companies are now the largest issuers of commercial paper in the U.S.
c. Finance companies rely on short-term commercial paper and customer deposits to
finance their assets.
d. The fastest growing area of finance companies in recent years has been in the area
of leasing and business loans.
e. Consumer loans represent the largest portion of the loan portfolio of finance
companies. - Answers - c. Finance companies rely on short-term commercial paper and
customer deposits to finance their assets.
Finance companies that prey on desperate higher-risk customers charging unfairly
exorbitant interest rates are referred to as
a. loan shark companies.
b. business credit companies.
c. refinancing companies.
d. personal credit companies.
e. captive companies. - Answers - a. loan shark companies.
What is the primary function of finance companies?
a. Make loans to both individuals and corporations.
b. Assist in the trading of securities in the secondary markets.
c. Extend loans to banks and other financial institutions.
d. Pool the financial resources of individuals and companies and invest in diversified
portfolios of assets.
e. Protect individuals and corporations from adverse events. - Answers - a. Make loans
to both individuals and corporations.
Finance companies charge different rates than do commercial banks which
a. All of the options.
b. causes some finance companies to be classified as subprime lenders.
c. tend to be higher than bank rates.
d. must meet state usury law guidelines.
e. often reflect a more risky borrower. - Answers - a. All of the options.
Finance companies often prefer to lease equipment to customers because
a. repossession in the event of default is easier and the finance company receives the
benefit of depreciation expense.
b. repossession in the event of default is easier.
c. the finance company receives the benefit of depreciation expense.
d. a lease with little or no down payment is more attractive to business customers.
e. All of the options. - Answers - e. All of the options.
Which of the following is NOT a type of finance company?
