FIN 366 Final Exam - 67096

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1.    In recent years, the number of commercial banks in the U.S. has been increasing.
a.    True or False

2.    Life insurance companies also manage private pension plans which include the offer of guaranteed investment contracts (GICs).
a.    True or False

3.    Which of the following occur when managers undertake growth-oriented investments to increase an FI’s size that may be inconsistent with stockholders’ value-maximizing objectives?
a.    Technology risk
b.    Operational efficiency
c.    Agency conflicts
d.    Diseconomies of scale
e.    Diseconomies of scope

4.    Which is the ultimate goal of a commercial bank?
a.    long-term growth
b.    deposit growth
c.    bank safety
d.    long-term profit maximization

5.    Under the Glass-Steagall Act commercial banks were permitted to underwrite and trade Federal government securities and general obligation bonds of states and municipalities.
a.    True or False

6.    All of the following are the major services of investment banking firms except
a.    making commercial loans
b.    bringing new security issues to market
c.    trading securities
d.    brokerage

7.    Which of the following legislations allowed banks and thrifts to expand geographically across state lines by acquiring the assets of failed thrifts?

a.    Bank Holding Company Act
b.    McFadden Act
c.    Financial Institutions Reform, Recovery, and Enforcement Act
d.    Douglas amendment
e.    Glass-Steagall Act

8.    Savings deposits are a larger percent of funding for small banks, compared to large banks.
a.    True or False

9.    Social Security is a fully funded pension program.
a.    True or False

10.    Which of the following is true about private placement?
a.    The underwriting function is avoided.
b.    The extremes of high credit quality firms and low or unknown credit quality firms use private placements.
c.    The terms may be negotiated between the issuer and the investors.
d.    The sale of securities must be restricted to a small group of accredited investors.
e.    All of the above is true.

11.    Which of the following money market rates is studied closely for indicators of changes in Federal Reserve monetary policy?

a.    Federal Funds
b.    Treasury bills
c.    commercial paper
d.    banker's acceptances

12.    A Mexican importer of computer parts from Canada would take which action in the foreign exchange markets?
a.    supply Canadian dollars
b.    demand pesos
c.    demand Canadian dollars
d.    demand U.S. dollars
e.    none of the above

13.    Which of the following laws is not associated with U.S. regulation of international banking?
a.    Federal Reserve Act of 1913
b.    Edge Act of 1919
c.    National Banking Act of 1863
d.    International Banking Act of 1978

14.    Which of the following is not an example of capital market securities?
a.    common stocks
b.    convertible bonds
c.    commercial paper
d.    mortgages

15.    A capital market financing is most likely to finance
a.    new plant and equipment.
b.    seasonal inventory needs.
c.    a quarterly dividend payment.
d.    the sale of common stock.

16.    At NYSE, limit orders are usually entered into the specialist’s limit order book.
a.    True or False

17.    A publicly traded company issuing additional shares of common stock does it through an IPO.
a.    True or False

18.    A foreign exchange rate are best described as
a.    the cost of a unit of foreign currency.
b.    the current interest rates of varying countries.
c.    the cost of a unit of one currency in terms of another currency.
d.    the expected change in prices of international goods.

19.    Which of the following is not a factor associated with international trade not faced by domestic traders?
a.    One party in the trade has to be concerned about foreign exchange risk.
b.    No one legal authority has control over the transaction and legal remedies.
c.    Credit information on opposite parties is often incomplete.
d.    There is one currency involved.

20.    A deficit in the trade balance of payments puts downward pressure on the exchange rate.
a.    True or False

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