ACFI 705 Final Exam
11. According to the text, the largest asset category in U.S. commercial banks' portfolios is
A. Investment securities
B. Commercial and industrial loans
C. Real estate loans
D. Cash
E. Deposits
12. The percentage of depository institutions' assets funded by some form of debt is in the range of
A. 50 percent
B. 75 percent
C. 85 percent
D. 90 percent
E. 40 percent
13. National-chartered commercial banks are regulated by
A. The FDIC only
B. The FDIC and the Federal Reserve System
C. The Federal Reserve System only
D. The FDIC, the Federal Reserve System and the Comptroller of the Currency
E. The Federal Reserve System and the Comptroller of the Currency
14. State-chartered commercial banks may be regulated by
A. The FDIC only
B. The FDIC and the Federal Reserve System
C. The Federal Reserve System only
D. The FDIC, the Federal Reserve System and the Comptroller of the Currency
E. The FDIC, the Federal Reserve System, the Comptroller of the Currency, and state banking
commissions
15. The strong performance of commercial banks during the early 2000s is due to
A. The stability of interest rates during this period
B. The ability of banks to shift credit risk from their balance sheets to financial
C. markets
D. The contraction of the number of banks and thrifts
E. The growth in the number of thrifts and credit unions
F. All of the above
16. Money center banks are considered to be any bank which
A. Has corporate headquarters in either New York City, Chicago, San Francisco,
B. Atlanta, Dallas or Charlotte
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. Does not participate in foreign currency markets
F. Is not characterized by any of the above
,17. A large number of the thrift failures in the 1980s was a result of
A. Interest rate risk exposure
B. Excessively risky investments
C. Fraudulent behavior on the part of managers
D. All of the above
E. Answers B and C only
18. Regulatory forbearance refers to a policy of
A. Allowing insolvent banks to continue to operate
B. Foreclosing real estate properties in the event on non-payments of mortgages
C. Strict regulation of banks, closing them down as soon as they are insolvent
D. Rescheduling of all loans of a client in the event of non-payment
E. B and C above
19. Credit Unions were generally less affected by the crisis in the thrift industry because
A. They had more assets in consumer loans than residential mortgages
B. They had more residential mortgages than consumer loans
C. They hold more government securities, on average
D. They hold less government securities, on average
E. Answers A and C
20. A primary advantage of belonging to the Federal Reserve System is
A. Direct access to the federal funds wire transfer network for interbank borrowing and lending
B. The lower reserves required under the Federal Reserve System
C. Direct access to the discount borrowing window of the Fed
D. Answers A and B
E. Answers A and C
21. Customer deposits are classified on the FI's balance sheet as
A. Assets, because the FI uses deposit funds to earn profits
B. Liabilities, because the FI uses deposits as a source of funds
C. Assets, because customers view deposits as assets
D. Liabilities, because the FI must meet reserve requirements on customer deposits
E. Liabilities, because FIs are required to serve depositors
22. Holdings of U.S. Treasury securities are classified on the FI's balance sheet as
A. Assets, because U.S. Treasury securities are default risk-free
B. Liabilities, because the FI must pay cash in order to acquire the securities
C. Assets, because securities holdings represent a use of funds
D. Liabilities, because the Treasury securities must be pledged as collateral against discount window borrowing
E. Assets, because the market for U.S. Treasury securities is the most liquid in the world
23. Customer loans are classified on the FI's balance sheet as
A. Assets, because the FI's major asset is its client base
B. Liabilities, because the customer may default on the loan
C. Assets, because the FI earns servicing fees on the loan
D. Liabilities, because the FI must transfer funds to the borrower at the initiation of the loan
E. Assets, because FIs originate and monitor loan portfolios
, 24. Transaction accounts are
A. Non-interest-bearing demand deposits
B. Large time deposits
C. Interest-bearing checking accounts
D. A or b
E. A or c
25. Identify the primary function of the Office of the Comptroller of the Currency.
A. Manage the deposit insurance fund and carry out bank examinations
B. Regulate and examine bank holding companies as well as banks
C. Charter national banks as well as to close them
D. Determining permissible activities
E. Both B and D
26. Which of the following manages the insurance funds for both commercial banks and savings associations?
A. FDIC
B. FSLIC
C. OCC
D. FRS
E. State authorities
27. What is the defining characteristic of the dual banking system?
A. Coexistence of parent and holding companies
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. Non-banking companies carrying out both banking and other activities
28. The primary function of insurance companies
A. Is to generate fees for the banks that sell insurance products
B. Is to sell a variety of consumer investment products
C. Is to protect policyholders from adverse events
D. Is A and C above
E. Is B and C above
29. The problem of adverse selection
A. Implies that many people who do not need insurance coverage have it through group plans
B. Means that those people who apply for insurance are most likely to need the insurance coverage
C. Causes insurance underwriters to alter the health statistics of the general population when
determining appropriate premiums
D. Creates a savings element along with the insurance component of the premium and policy
E. B and C above are correct
30. Insurance policy benefits are classified on the FI's balance sheet as
A. Liabilities, because the insurance company may have to pay out the benefits
B. Assets, because policy benefits are valuable
C. Liabilities, because customers may fall behind on their premium payments
D. Assets, because policy benefits are fully covered by premium payments
E. Liabilities, because insurance companies must maintain a capital base to cover the payments of benefits
11. According to the text, the largest asset category in U.S. commercial banks' portfolios is
A. Investment securities
B. Commercial and industrial loans
C. Real estate loans
D. Cash
E. Deposits
12. The percentage of depository institutions' assets funded by some form of debt is in the range of
A. 50 percent
B. 75 percent
C. 85 percent
D. 90 percent
E. 40 percent
13. National-chartered commercial banks are regulated by
A. The FDIC only
B. The FDIC and the Federal Reserve System
C. The Federal Reserve System only
D. The FDIC, the Federal Reserve System and the Comptroller of the Currency
E. The Federal Reserve System and the Comptroller of the Currency
14. State-chartered commercial banks may be regulated by
A. The FDIC only
B. The FDIC and the Federal Reserve System
C. The Federal Reserve System only
D. The FDIC, the Federal Reserve System and the Comptroller of the Currency
E. The FDIC, the Federal Reserve System, the Comptroller of the Currency, and state banking
commissions
15. The strong performance of commercial banks during the early 2000s is due to
A. The stability of interest rates during this period
B. The ability of banks to shift credit risk from their balance sheets to financial
C. markets
D. The contraction of the number of banks and thrifts
E. The growth in the number of thrifts and credit unions
F. All of the above
16. Money center banks are considered to be any bank which
A. Has corporate headquarters in either New York City, Chicago, San Francisco,
B. Atlanta, Dallas or Charlotte
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. Does not participate in foreign currency markets
F. Is not characterized by any of the above
,17. A large number of the thrift failures in the 1980s was a result of
A. Interest rate risk exposure
B. Excessively risky investments
C. Fraudulent behavior on the part of managers
D. All of the above
E. Answers B and C only
18. Regulatory forbearance refers to a policy of
A. Allowing insolvent banks to continue to operate
B. Foreclosing real estate properties in the event on non-payments of mortgages
C. Strict regulation of banks, closing them down as soon as they are insolvent
D. Rescheduling of all loans of a client in the event of non-payment
E. B and C above
19. Credit Unions were generally less affected by the crisis in the thrift industry because
A. They had more assets in consumer loans than residential mortgages
B. They had more residential mortgages than consumer loans
C. They hold more government securities, on average
D. They hold less government securities, on average
E. Answers A and C
20. A primary advantage of belonging to the Federal Reserve System is
A. Direct access to the federal funds wire transfer network for interbank borrowing and lending
B. The lower reserves required under the Federal Reserve System
C. Direct access to the discount borrowing window of the Fed
D. Answers A and B
E. Answers A and C
21. Customer deposits are classified on the FI's balance sheet as
A. Assets, because the FI uses deposit funds to earn profits
B. Liabilities, because the FI uses deposits as a source of funds
C. Assets, because customers view deposits as assets
D. Liabilities, because the FI must meet reserve requirements on customer deposits
E. Liabilities, because FIs are required to serve depositors
22. Holdings of U.S. Treasury securities are classified on the FI's balance sheet as
A. Assets, because U.S. Treasury securities are default risk-free
B. Liabilities, because the FI must pay cash in order to acquire the securities
C. Assets, because securities holdings represent a use of funds
D. Liabilities, because the Treasury securities must be pledged as collateral against discount window borrowing
E. Assets, because the market for U.S. Treasury securities is the most liquid in the world
23. Customer loans are classified on the FI's balance sheet as
A. Assets, because the FI's major asset is its client base
B. Liabilities, because the customer may default on the loan
C. Assets, because the FI earns servicing fees on the loan
D. Liabilities, because the FI must transfer funds to the borrower at the initiation of the loan
E. Assets, because FIs originate and monitor loan portfolios
, 24. Transaction accounts are
A. Non-interest-bearing demand deposits
B. Large time deposits
C. Interest-bearing checking accounts
D. A or b
E. A or c
25. Identify the primary function of the Office of the Comptroller of the Currency.
A. Manage the deposit insurance fund and carry out bank examinations
B. Regulate and examine bank holding companies as well as banks
C. Charter national banks as well as to close them
D. Determining permissible activities
E. Both B and D
26. Which of the following manages the insurance funds for both commercial banks and savings associations?
A. FDIC
B. FSLIC
C. OCC
D. FRS
E. State authorities
27. What is the defining characteristic of the dual banking system?
A. Coexistence of parent and holding companies
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. Non-banking companies carrying out both banking and other activities
28. The primary function of insurance companies
A. Is to generate fees for the banks that sell insurance products
B. Is to sell a variety of consumer investment products
C. Is to protect policyholders from adverse events
D. Is A and C above
E. Is B and C above
29. The problem of adverse selection
A. Implies that many people who do not need insurance coverage have it through group plans
B. Means that those people who apply for insurance are most likely to need the insurance coverage
C. Causes insurance underwriters to alter the health statistics of the general population when
determining appropriate premiums
D. Creates a savings element along with the insurance component of the premium and policy
E. B and C above are correct
30. Insurance policy benefits are classified on the FI's balance sheet as
A. Liabilities, because the insurance company may have to pay out the benefits
B. Assets, because policy benefits are valuable
C. Liabilities, because customers may fall behind on their premium payments
D. Assets, because policy benefits are fully covered by premium payments
E. Liabilities, because insurance companies must maintain a capital base to cover the payments of benefits
