Question 1

________ is creating a marketable capital market instrument by bundling a portfolio of mortgage or auto loans.

Accepted Answer

A)   diversification.
B)   arbitrage.
C)   computerization.
D)   securitization.E) B) and C)
F) C) and D)

Question 2

The legislation that overturned the prohibition on interstate banking is

Accepted Answer

A)   the McFadden Act.
B)   the Gramm-Leach-Bliley Act.
C)   the Glass-Steagall Act
D)   the Riegle-Neal ActE) A) and D)
F) A) and B)

Question 3

The primary reason for the recent reduction in the number of banks is

Accepted Answer

A)   bank failures.
B)   re-regulation of banking.
C)   restrictions on interstate branching.
D)   mergers and acquisitions.E) A) and C)
F) B) and D)

Question 4

The spectacular growth in international banking can be explained by

Accepted Answer

A)   the rapid growth in international trade.
B)   the 1988 Basel Agreement.
C)   the desire for U.S. banks to escape burdensome domestic regulations.
D)   the creation of the World Trade Organization.E) A) and D)
F) A) and C)

Question 5

________ within the U.S.can make loans to foreigners but cannot make loans to domestic residents.

Accepted Answer

A)   Edge Act corporations
B)   International Banking Facilities
C)   Universal banks
D)   Euro banksE) A) and B)
F) B) and C)

Question 6

Experts predict that the future structure of the U.S.banking industry will have

Accepted Answer

A)   an increased number of banks.
B)   as few as ten banks.
C)   several thousand banks.
D)   a few hundred banks.E) A) and C)
F) A) and D)

Question 7

In 1977,he pioneered the concept of selling new public issues of junk bonds for companies that had not yet achieved investment-grade status.

Accepted Answer

A)   Michael Milken
B)   Roger Milliken
C)   Ivan Boskey
D)   Carl IchanE) A) and B)
F) A) and C)

Question 8

U) S.banks have most of their branches in

Accepted Answer

A)   Latin America, the Far East, the Caribbean, and London.
B)   Latin America, the Middle East, the Caribbean, and London.
C)   Mexico, the Middle East, the Caribbean, and London.
D)   South America, the Middle East, the Caribbean, and Canada.E) B) and D)
F) All of the above

Question 9

The legislation that separated investment banking from commercial banking until its repeal in 1999 is known as the

Accepted Answer

A)   National Bank Act of 1863.
B)   Federal Reserve Act of 1913.
C)   Glass-Steagall Act.
D)   McFadden Act.E) None of the above
F) C) and D)

Question 10

As the banking system in the United States evolves,it is expected that

Accepted Answer

A)   the number and importance of small banks will increase.
B)   the number and importance of large banks will decrease.
C)   small banks will grow at the expense of large banks.
D)   the number and importance of large banks will increase.E) All of the above
F) A) and D)

Question 11

A major controversy involving the banking industry in its early years was

Accepted Answer

A)   whether banks should both accept deposits and make loans or whether these functions should be separated into different institutions.
B)   whether the federal government or the states should charter banks.
C)   what percent of deposits banks should hold as fractional reserves.
D)   whether banks should be allowed to issue their own bank notes.E) A) and C)
F) A) and B)

Question 12

The entry of AT&T and GM into the credit card business is an indication of

Accepted Answer

A)   government's efforts to deregulate the provision of financial services.
B)   the rising profitability of credit card operations.
C)   the reduction in costs of credit card operations since 1990.
D)   the sale of unprofitable operations by Bank of America and Citicorp.E) B) and D)
F) A) and C)

Question 13

The most important source of the changes in supply conditions that stimulate financial innovation has been the

Accepted Answer

A)   deregulation of financial institutions.
B)   dramatic increase in the volatility of interest rates.
C)   improvement in computer and telecommunications technology.
D)   dramatic increase in competition from foreign banks.E) A) and B)
F) C) and D)

Question 14

Prior to 2008,bank managers looked on reserve requirements

Accepted Answer

A)   as a tax on deposits.
B)   as a subsidy on deposits.
C)   as a subsidy on loans.
D)   as a tax on loans.E) All of the above
F) B) and C)

Question 15

State banking authorities have sole jurisdiction over state banks

Accepted Answer

A)   without FDIC insurance.
B)   that are not members of the Federal Reserve System.
C)   operating as bank holding companies.
D)   chartered in the 21st century.E) A) and C)
F) C) and D)

Question 16

In the 1950s the interest rate on three-month Treasury bills fluctuated between 1 percent and 3.5 percent; in the 1980s it fluctuated between ________ percent and ________ percent.

Accepted Answer

A)   5; 15
B)   4; 11.5
C)   4; 18
D)   5; 10E) A) and B)
F) None of the above

Question 17

Money market mutual funds

Accepted Answer

A)   function as interest-earning checking accounts.
B)   are legally deposits.
C)   are subject to reserve requirements.
D)   have an interest-rate ceiling.E) None of the above
F) All of the above

Question 18

The belief that bank failures were regularly caused by fraud or the lack of sufficient bank capital explains,in part,the passage of

Accepted Answer

A)   the National Bank Charter Amendments of 1918.
B)   the Garn-St. Germain Act of 1982.
C)   the National Bank Act of 1863.
D)   Federal Reserve Act of 1913.E) A) and B)
F) A) and C)

Question 19

Which of the following is a true statement concerning bank holding companies?

Accepted Answer

A)   Bank holding companies own few large banks.
B)   Bank holding companies have experienced dramatic growth in the past three decades.
C)   The McFadden Act has prevented bank holding companies from establishing branch banks.
D)   Bank holding companies can own only banks.E) None of the above
F) A) and B)

Question 20

The experience of disintermediation in the banking industry illustrates that

Accepted Answer

A)   more regulation of financial markets may avoid such problems in the future.
B)   banks are unable to remain competitive with other financial intermediaries.
C)   consumers no longer desire the services that banks provide.
D)   markets invent alternatives to costly regulations.E) All of the above
F) B) and C)

Exam 12: Banking Industry: Structure and Competition

The belief that bank failures were regularly caused by fraud or the lack of sufficient bank capital explains,in part,the passage of

Correct AnswerverifiedShow Answer

The primary reason for the recent reduction in the number of banks is

Correct AnswerverifiedShow Answer

In 1977,he pioneered the concept of selling new public issues of junk bonds for companies that had not yet achieved investment-grade status.

Correct AnswerverifiedShow Answer

U) S.banks have most of their branches in

Correct AnswerverifiedShow Answer

________ is creating a marketable capital market instrument by bundling a portfolio of mortgage or auto loans.

Correct AnswerverifiedShow Answer

In the 1950s the interest rate on three-month Treasury bills fluctuated between 1 percent and 3.5 percent; in the 1980s it fluctuated between ________ percent and ________ percent.

Correct AnswerverifiedShow Answer

Money market mutual funds

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The legislation that overturned the prohibition on interstate banking is

Correct AnswerverifiedShow Answer

Which of the following is a true statement concerning bank holding companies?

Correct AnswerverifiedShow Answer

A major controversy involving the banking industry in its early years was

Correct AnswerverifiedShow Answer

The entry of AT&T and GM into the credit card business is an indication of

Correct AnswerverifiedShow Answer

The spectacular growth in international banking can be explained by

Correct AnswerverifiedShow Answer

The most important source of the changes in supply conditions that stimulate financial innovation has been the

Correct AnswerverifiedShow Answer

As the banking system in the United States evolves,it is expected that

Correct AnswerverifiedShow Answer

Experts predict that the future structure of the U.S.banking industry will have

Correct AnswerverifiedShow Answer

Prior to 2008,bank managers looked on reserve requirements

Correct AnswerverifiedShow Answer

________ within the U.S.can make loans to foreigners but cannot make loans to domestic residents.

Correct AnswerverifiedShow Answer

The legislation that separated investment banking from commercial banking until its repeal in 1999 is known as the

Correct AnswerverifiedShow Answer

State banking authorities have sole jurisdiction over state banks

Correct AnswerverifiedShow Answer

The experience of disintermediation in the banking industry illustrates that

Correct AnswerverifiedShow Answer

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In the 1950s the interest rate on three-month Treasury bills fluctuated between 1 percent and 3.5 percent; in the 1980s it fluctuated between percent and percent.

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