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Exam

Name___________________________________

MULTIPLE CHOICE.  Choose the one choice that best completes the announcement or answers the interrogation.

1)  The claim for an asset fuses if ________ declines. 1)

A)  imperil connectring-to to other property              B) mammon C) expected recompense connectring-to to other property D) wateryity connectring-to to other property

2)  Banks' attempts to work-out unconducive preliberty and intellectual jeopard heights aid elucidate advance 2) precede principles such as A) praise aspectning.

B)   collateral and compensating equalizes.

C)   screening and advisering of advance applicants.

D)  all of the aggravate.

E)   singly A and B of the aggravate.

3)  When a advancee refuses to fabricate a advance, although borrowers are inclined to pay the recognized curiosity-behalf rebuke             3) or flush a eminent rebuke, it is said to promise in ________.

A)  praise aspectning B) solid lending C) strategic denial D) collusive manner

4)  If a bank has further rebuke- sensitive liabilities than rebuke- sensitive property, then a(n) ________ in curiosity-behalf 4) rebukes conquer ________ bank proceeds.

A)  increase; extension               B) extension; subjugate

                         C) extricate; not affect                                                            D) extricate; subjugate

First National Bank

 

   Assets                  Liabilities

Rate-sensitive Fixed-rate

$20 darling         $50 darling

$80 darling         $40 darling

Table 23.1

5)  Referring to Table 23.1, if curiosity-behalf rebukes fuse by 5 percentage points, then bank proceeds (measured     5) using gap anatomy) conquer

A)  extension by $1.5 darling.  B) extricate by $0.5 darling.

                         C) extricate by $2.5 darling.                                                 D) extricate by $1.5 darling.

First National Bank

 

   Assets                  Liabilities

Rate-sensitive Fixed-rate

$40 darling         $50 darling

$60 darling         $40 darling

Table 23.2

6) Connect to Table 23.2. Gorgeous that the mean protraction of the bank's property is foul-mouthed years, opportunity the mean protraction of its liabilities is three years, a fuse in curiosity-behalf rebukes from 5 percent to 10 percent conquer source the net merit of First National to ________ by ________ of the whole peculiar asset treasure.

          A) extricate; 6.2%                   B) extension; 5%                    C) extricate; 5%                      D) extricate; 1.3%

6)

7)  Measuring the sensitivity of bank proceeds to diversifys in curiosity-behalf rebukes by multiplying the gap for      7) sepaobjurgate manliness subintervals by the diversify in the curiosity-behalf rebuke is denominated A) basic gap anatomy.

B)   the manliness bucket adit to gap anatomy.

C)   the segmented manliness adit to curiosity-behalf- exposure anatomy.

D)  the segmented manliness adit to gap anatomy.

E)   none of the aggravate.

8)  If a extricate in curiosity-behalf rebukes sources the negotiate treasure of a bank's net merit to fuse, then the bank       8) must possess a ________.

                         A) dogmatic protraction gap                                                     B) dogmatic gap

    
  
 
 


                         C) privative protraction gap                                                    D) privative gap

B)   does not mete the sensitivity of net merit to curiosity-behalf rebuke diversifys.

C)   does not mete the sensitivity of proceeds to curiosity-behalf rebuke diversifys.

D)  is adapted gorgeous that the succumb deflexion is insipid.

E)   is adapted gorgeous that the succumb deflexion does not diversify.

10)  One height delay basic gap anatomy is that it

A)  is adapted gorgeous curiosity-behalf rebukes on all maturities are resembling.

B)   does not mete the sensitivity of proceeds to curiosity-behalf rebuke diversifys.

C)   is adapted gorgeous curiosity-behalf rebukes on all maturities diversify by resembling totals.

D)  applies singly to financial bodys.

E)   measures the sensitivity of net merit to curiosity-behalf rebuke diversifys.

11)  A bank supervisor solicitous encircling curiosity-behalf proceeds who expects curiosity-behalf rebukes to decline and who knows              11) the bank currently has a dogmatic gap should ________ rebuke- sensitive property and ________ rebuke- sensitive liabilities.

A)  decrease; subjugate              B) subjugate; extension

                         C) extension; extension                                                            D) extension; subjugate

12)  The estimate of narrows unappropriated in a feature financial coming is the ________.          12)

A)  open curiosity-behalf        B) unappropriated equalize

                         C) apostacy raze                                                                         D) claim coefficient

13) The utility of obtrusive narrows aggravate comings narrows is that obtrusive narrows

            A) possess inferior absence imperil.                                                 B) are standardized.

            C) are further watery.                                                                D) are none of the aggravate.

13)

14)  When a financial body hedges the curiosity-behalf- rebuke imperil for a local asset, the hedge is denominated a 14) ________.

A)  macro hedge     B) comings hedge C) micro hedge   D) wayward hedge

15)  An extension in the inconsistency of the inferiorlying asset, all other things held uniform, conquer ________ the 15) liberty bribe.

A)  not affect             B) extension C) subjugate D) Not sufficient knowledge is dedicated.

16)  A financial narrow that obligates one edge to exdiversify a set of payments it owns for another set of             16) payments owned by another edge is denominated a ________.

A)  wayward put liberty               B) swap

                         C) wayward persuade liberty                                                               D) wayward hedge

17)  If Second National Bank has further rebuke- sensitive property than rebuke- sensitive liabilities, it can subjugate                17) curiosity-behalf- rebuke imperil delay a swap which requires Second National to A) entertain a unroving rebuke opportunity paying a unformed rebuke.

B)   twain entertain and pay a unformed rebuke.

C)   twain entertain and pay a unroving rebuke.

D)  pay a unroving rebuke opportunity receiving a unformed rebuke.

18)  The use of financial derivatives by financial bodys to hedge can subjugate imperil. However, they 18) can too extension imperil. Which of the aftercitedcited ins illustrates this?

A)  Some bodys such colossal totals of derivatives that the totals abound chief.

B)   Financial derivatives authorize financial bodys to extension their leverage.

C)   All of the aggravate are efficient ins.

D)  None of the aggravate are efficient ins.

19)  Factors that source the claim deflexion for chains to reactuate to the left include   19)

A)  an extension in the wateryity of ministers.

B)   an extension in the inflation rebuke.

C)   a subjugate in the inconsistency of minister expenses.

D)  all of the aggravate.

E)   none of the aggravate.

20)  According to the expectations speculation of the account construction,              20)

A)  buyers of chains choose short- account to long- account chains.

B)   curiosity-behalf rebukes on chains of divergent maturities actuate contemporaneously aggravate prolongation.

C)   the curiosity-behalf rebuke on long- account chains conquer abound the mean of expected coming short- account curiosity-behalf rebukes.

D)  all of the aggravate.

E)  

 
 


singly A and B of the aggravate.

21) If bad praise imperils are the ones who most actively attempt advances and, consequently, entertain them from financial intermediaries, then financial intermediaries countenance the height of

            A) unconducive preoption.                                                             B) valuable particularize honesty.

             C) bounteous- riding.                                                                       D) intellectual jeopard.

21)

22)  The height created by asymmetric knowledge antecedently the performance occurs is denominated ________,             22) opportunity the height created aftercited the performance occurs is denominated ________.

A)  free- riding; valuable particularize honesty           B) unconducive preoption; intellectual jeopard

            C) intellectual jeopard; unconducive preoption                                 D) valuable particularize honesty; bounteous- riding

23)  The course of deleveraging connects to

A)  a contraction in obligation fair by banks.

B)   cutbacks in lending by financial bodys.

C)   twain A and B.

D)  none of the aggravate.

24)  When we connect to the unsubstantiality banking order, what are we talking encircling?           24)

A)  the subsidiaries of pawnory bodys

B)   the "underground" banking order used for illicit activities

C)   hedge funds, cannonade banks, and other nonbank financial firms that minister wateryity

D)  none of the aggravate

25)  Federal Restraint insurrection is opinion to

A)  introduce longer- run considerations to monetary prudencemaking.

B)   introduce a short- account prepossession to monetary prudencemaking.

C)   guide to amelioreprimand fiscal and monetary prudence coordination.

D)  do twain A and B of the aggravate.

26)  The speculation of bureaucratic manner suggests that the extrinsic of a bureaucracy is to maximize 26) A) its own success.

B)   the public's success.

C)   profits.

D)  conflict betwixt the magistreprimand and legislative branches of synod.

27)  Instrument insurrection media the mediate bank is bounteous from  27)

A)  political urgency touching the goals it pursues.

B)   political urgency touching how it uses the tools of monetary prudence.

C)   twain A and B of the aggravate.

D)  neither A nor B of the aggravate.

A)  the expense the Fed pays for synod securities.

B)   the curiosity-behalf rebuke on advances of restraints from one bank to another.

C)   the expense banks pay the Fed for synod securities.

D)  the curiosity-behalf rebuke on advances from a bank to the federal synod.

E)   the curiosity-behalf rebuke on advances from the Fed to a bank.

29) Which of the aftercitedcited announcements is gentleman?

A)                       Bubbles driven solely by beastly lavishment guide to a deficiency of financial bodys.

B)                        Credit- driven asset bubbles are featurely imperilled. When asset expenses decline, the deleveraging of praise negotiates subjugates economic courage. C) Twain A and B are punish.

D) Neither A nor B is punish.

29)

30)  Bankers' curiosity-behalf touching the optimal mix of growth restraints, subordinate restraints, borrowings  30) from the Fed, and borrowings from other banks to trade delay pawn outflows is an in of

A)  managing curiosity-behalf- rebuke imperil.        B) wateryity precede.

            C) jurisdiction precede.                                                    D) none of the aggravate.

31)  Holding everything else uniform, if the federal funds rebuke fuses, then the claim for       31) A) restraints conquer not diversify besource the Fed sets the raze of required restraints.

B)   required restraints fuses besource the require of borrowing from the Fed is connectring-toly inferior.

C)   growth restraints fuses besource they possess a eminent recompense.

D)  required restraints declines besource the require of borrowing from the Fed is connectring-toly eminent.

E)   growth restraints declines besource they possess a eminent require.

32)  If a bank has $100,000 of pawns, a required restraint aspect of 20 percent, and $40,000 in restraints,                32) then the apex pawn outflow it can maintain delayout altering its equalize quibble is

A)  $25,000.              B) $10,000.           C) $30,000.           D) $20,000.

33)  A bank can subjugate its whole total of advances unappropriated by       33)

A)  "calling in" advances; that is, by not renewing some advances when they end due.

B)   selling advances to other banks.

C)  

 
 


selling advances to the Federal Reserve.

D)  doing all of the aggravate.

E)   doing singly A and B of the aggravate.

A)  encourages bank supervisors to obtain?} on important imperils than they incorrectly would.

B)   attracts imperil- prone entrepreneurs to the banking activity.

C)   reduces the incentives of pawnors to adviser the imperiliness of their banks' asset portfolios.

D)  does all of the aggravate.

E)   does singly A and B of the aggravate.

35)  The pristine contrariety betwixt the "payoff" and the "purchase and assumption" orders of      35) handling failed banks is that the FDIC

A)  guarantees all pawns, not fitting those inferior the $250,000 stipulation, when it uses the "payoff" order.

B)   is further slight to use the "payoff" order when the bank is abundant and it fears that pawnor losses may incite office bankruptcies and other bank deficiencys.

C)   guarantees all pawns, not fitting those inferior the $250,000 stipulation, when it uses the "purchase and assumption" order.

D)  does twain A and B of the aggravate.

E)   does twain B and C of the aggravate.

36)  The synod that disjoined retail banking from the securities activity is disclosed as the 36) ________.

A)  Glass- Steagall Act B) McFadden Act C) National Bank Act D) Federal Restraint Act

A)  subjugate financial bodys' curiosity-behalf- rebuke imperil.

B)   benefit homeowners when curiosity-behalf rebukes are declineing.

C)   subjugate households' imperil of having to pay eminent advance payments when curiosity-behalf rebukes fuse.

D)  do singly A and B of the aggravate.

38)  The bundling of advances into a saleable guarantee (usually for abundant bodyal investors) is 38) denominated ________.

A)  hedge libertying

B)   disintermediation

C)   securitization

D)  quasi- intermediation E) comings bundling

39)  When disintermediation occurs, the banking order ________ pawns and bank lending ________.       39)

A)  loses; extensions B) gains; extensions

            C) loses; subjugates                                                                D) gains; subjugates

40)  In a ________ banking order, retail banks promise in securities inferiorwriting, but separate             40) subsidiaries precede the divergent activities. Also, banking and security are not typically inferiortaken contemporaneously in this order.

A)  universal B) divided

C)   British- style universal

D)  compartmentalized

E)   severable

 

Amounts are in darlings

 

Assets

 

Duration

Reserves and Cash Items

 $          6 

0

Securities

 

 

 < 1 year

 $          5 

0.75

 1 to 2 years

 $          5 

1.5

 > 2 years

 $        10 

5

Residential Mortgages

 

 

 Variable Rate

 $          8 

0.5

 Fixed Rate

 $        10 

8

Commercial Loans

 

 

 < 1 year

 $        15 

0.5

 1 to 2 years

 $        13 

1.3

 > 2 years

 $        25 

8

Physical Capital

 $          3 

0

 

 

 

Total Assets

 $      100 

 

 

 

Liabilities

 

Duration

Checkable Deposits

15

2

Money Negotiate Accounts

8

0.1

Savings Deposits

10

1

Certificates of Deposits

 

 

 Variable Rate

5

0.5

 < 1 year

15

0.5

 1­2 years

10

1.5

 > 2 years

5

4

Fed Funds

7

0

Borrowings

 

 

 < 1 year

10

0.5

 1­2 years

5

1.5

 > 2 years

5

3

 

 

 

Equity

5

 

 

 

 

Liabilities + Equity

100

 

                 

15 pts

1.) What is the application to this year’s net proceeds if curiosity-behalf rebukes extension from 5% to 6%?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5 pts

2.) What is the application to equity if curiosity-behalf rebukes extension from 5% to 6%?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Extra Credit:

 

“This parrot is _________________________________________________________” Extra Praise (10 pts)

A semiannual chain delay 4 years to manliness has a coupon rebuke of 5%. The countenance treasure of the chain is $1,000 and trades at $1,074.86. Calculate Macaulay protraction, qualified protraction, and telling protraction for this chain.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Using the knowledge from the former interrogation, how abundantly would the chainholder gain/lose if curiosity-behalf rebukes subjugated by 50 bps? 

 

 

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