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|Name |Just highlight your answer or type your response on the line below |

| |Questions from Kidwell, Blackwell, Whidbee, Peterson: Financial Institutions, Markets, and Money, 10th Edition |

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| |Chapter 2 COMPLETION QUESTIONS |

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| |1. The primary purpose of a central bank is to control a nation’s:_______ . |

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| |2. The Fed’s largest single liability is the: _____________ |

|Leave blank | |

| |3. A Fed asset not related to monetary policy is _______________. |

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| |4. The Federal Reserve controls |

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| |5. The FOMC or ____________ has ______members. |

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| |6. The document by which the FOMC instructs the trading desk is called a ______ . |

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| |7. Among U.S. commercial banks, all ______banks are members of the Federal Reserve System while some _________ banks |

| |are members. |

|Leave blank | |

| |8. Total reserves equal required reserves plus _________ ___________ . |

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| |9. There are _______federal reserve banks. |

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| |10. Borrowing from the Fed is called “__________ ”. |

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|Leave blank |Chapter 3 MULTIPLE-CHOICE QUESTIONS |

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| |1. Which of the following powers or tools of the Fed impacts the monetary base most significantly? |

| |a. discount rate b. Reg Q c. open market operations d. Bank examination |

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| |2. The monetary base excludes which Fed balance sheet items? |

| |a. U.S. Treasury securities b. “Agency” securities” |

| |c. “DACI” d. all of the above |

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| |3. M2 includes: |

| |a. currency in circulation b. demand deposits |

|Leave blank |c. both of the above d. none of the above |

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| |4. Which of the following is not a channel of transmission of monetary policy? |

| |a. Reg Q interest rate ceilings b. consumer spending for durable goods and |

| |housing |

| |c. net exports d. business investment in real assets |

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| |5. “Easing” monetary policy would have what impact on the value of the dollar against other currencies? |

| |a. increase |

|Leave blank |b. decrease |

| |c no effect |

| |d. none of the above |

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| |Chapter 7 MULTIPLE-CHOICE QUESTIONS |

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| |1. The money market security with the lowest yield to the investor is likely to be: |

|Leave blank |a. a Treasury bill. |

| |b. commercial paper. |

| |c. agency issues. |

| |d. negotiable CDs. |

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| |2. All of the following represents a characteristic of money market instruments except: |

| |a. low default risk b. guaranteed marketability |

| |c. debt obligation d. short term |

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| |3. The fed funds rate is very important to the economy because |

|Leave blank |a. it measures the return on the most liquid of all the financial assets traded |

| |b. it is closely related to the conduct of monetary policy |

| |c. it measures directly the availability of excess reserves in the banking system |

| |d. all of the above |

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| |4. All of the following money market participants are major investors in money market securities except: |

| |a. Federal Reserve banks. b. the U.S. Treasury. |

| |c. commercial banks. d. corporate business. |

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|Leave blank |5. A competitive bid in the Treasury securities auction market has all of the following characteristics except: |

| |a. the bidder specifying the quantity of bills desired |

| |b. the price the investor wishes to pay |

| |c. large, institutional investors |

| |d. bids for a maximum of $5,000,000 |

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| |Chapter 8 TRUE-FALSE QUESTIONS |

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|Leave blank |T F 1. Capital market securities can be either debt or equity; all money market instruments are debt securities. |

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| |T F 2. The bond contract is called a debenture. |

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| |T F 3. Households are generally surplus sectors; business and governments are usually deficit sectors. |

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| |T F 4. The money market is a dealer only market whereas the capital market trading is dominated by exchanges. |

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| |T F 5. The money market provides liquidity; the capital market finances economic growth. |

| |Chapter9 |

|Leave blank | |

| |Chapter 10 COMPLETION QUESTIONS |

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| |1. A majority shareholder group will win all the board seats in a board of directors’ election using |

| |_____________voting. |

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| |2. Securities are first issued in the _________market; subsequent trading is in the __________ market. |

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| |3. While the money market is a _____ ________market, the capital market finances ______ _________. |

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| |4. The largest amount outstanding of any one capital market security is ______ _______ followed by _______ _______. |

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|Leave blank |Chapter 12 MULTIPLE-CHOICE QUESTIONS |

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| |1. A British importer of U.S. computer equipment would take which action in the foreign exchange markets? |

| |a. supply dollars b. demand dollars |

| |c. demand pounds d. both a and c above |

| |e. none of the above |

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| |2. Capital accounts transactions are all of the following except they: |

| |a. are made with the expectation of a future gain or to settle a debt. |

| |b. are reversible. |

| |c. represent a flow of income. |

|Leave blank |d. represent a geographic repositioning of wealth. |

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| |3. Under freely floating exchange rates a government would |

| |a. do nothing. |

| |b. sell assets to foreign investors for foreign exchange to buy the domestic currency. |

|Leave blank |c. buy assets to foreign investors for domestic currency. |

| |d. intervene in the markets for the benefit of its exporters. |

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| |4. The Eurocurrency market serves as a place to store excess liquidity for multinational corporations, countries and |

| |individuals because of all of the following except: |

| |a. Lack of regulation allows investors to hold debt securities in bearer form. |

| |b. The presence of a withholding of tax. |

| |c. Investments earn higher returns. |

| |d. Eurocurrency deposits are highly liquid because of very short maturities with nearly 90 percent of deposits being |

| |less than 180 days. |

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|Leave blank |5. A __________ draft would be paid on demand; whereas a bank would pay a __________ draft at maturity as stated in the|

| |__________. |

| |a. time; sight; bill of lading |

| |b. sight; time; bill of lading |

| |c. time; sight; letter of credit |

| |d. sight; time; letter of credit |

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| |Chapter 13 COMPLETION QUESTIONS |

|Leave blank | |

| |1. In commercial banks SAVINGS deposits are the most important source of funds; ___________ loans represent the major |

| |investment category. |

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| |2. ______________deposits represent about two thirds of M1. |

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| |3. Though interest payments have been prohibited on demand deposits in the past, banks have paid ____ _____interest by |

| |offering "free" checking accounts, convenience, and other “perks”. |

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| |4. Several money market securities are listed below. Indicate whether each security represents a bank asset, a bank |

| |liability, or neither. |

| |a. Banker's Acceptance |

|Leave blank |b. Negotiable Certificate of Deposit |

| |c. Treasury Bill |

| |d. Federal Funds Purchased |

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| |5. The bank investment portfolio provides both __________ and _______to the bank. |

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| |Chapter 15 TRUE-FALSE QUESTIONS |

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| |T F 1. U.S. regulators have attempted to separate domestic banking risks and international banking risks. |

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| |T F 2. The FDIC is the principal U.S. regulator of international banking activity. |

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| |T F 3. International banking facilities (IBFs) operate as subsidiaries of bank holding companies. |

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| |T F 4. Expropriation and nationalization are two methods of guaranteeing payment of U.S. bank loans to developing |

| |countries. |

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| |T F 5. Pooling risk entails lending by several banks to a foreign borrower. |

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| |Chapter 16 COMPLETION QUESTIONS |

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| |1.Bank regulation is intended to provide a trade-off between bank ________and bank __________. |

|Leave blank | |

| |2.Historically, when banks have failed, government has responded with increased _____. |

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| |3.Banks are regulated to protect the ________ and maintain a _______economy. |

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| |4.Many banks that failed in the 1930s did so because the central bank did not supply sufficient _____and did not |

| |prevent bank ________ |

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| |5. Bank failures of the 1980s stemmed more from regional economic distress in the areas of __________and _________. |

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| |Chapter 18 MULTIPLE-CHOICE QUESTIONS |

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| |1.Which of the following affects the level of insurance premiums? |

|Leave blank |a. probability of loss b. value of loss |

| |c. expected operating expenses d.all of the above |

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| |2. Which of the following is likely to be a material component of an insurer’s revenue? |

| |a. interest on bonds b .interest on mortgages |

| |c. dividends on stocks d. all of the above |

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| |3. “Objective risk” is |

| |a. synonymous with “pure risk” |

| |b. determined according to principles of probability and statistics |

| |c. uninsurable |

|Leave blank |d. synonymous with “speculative risk” |

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| |4. The “Law of Large Numbers” is |

| |a. a statistical principle relied on by insurers in managing objective risk |

| |b. an informal rule of thumb for valuing pure risks |

| |c. a principle of portfolio diversification that helps manage interest rate risk |

| |d. none of the above |

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| |5. “Qualified” pension plans would have an incentive to invest in all the following except |

| |a. municipal bonds b. corporate bonds |

| |c. preferred stocks d. mortgages |

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| |Chapter 19 TRUE/FALSE QUESTIONS |

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| |T F 1. The Banking Act of 1933, known as the Glass-Steagall Act, has effectively kept commercial banks out of the |

| |commercial lending area. |

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| |T F 2. Investment banking firms provide both financing and investment services for borrowers and lenders, |

| |respectively. |

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| |T F 3. The 40% margin rule requires the buyer/seller of a security to provide at least 60% of the funds necessary to |

| |cover the transaction, borrowing 40%. |

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| |T F 4. Venture capital firms compete with commercial banks for new business loans. |

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| |T F 5. Discount brokers offer investment advice at prices below full service security brokerage houses. |

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| |Questions from Financial Institutions Management : A Risk Management Approach, 6e |

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| |2-26 All commercial banks must be members of the Federal Reserve |

|Leave blank |System. |

| |T F |

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| |2-27 The Federal Reserve System has regulatory supervision over all |

| |holding company banks whether they include national- or state- |

| |chartered banks. |

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| |T F |

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| |2-28 The primary objective of the 1927 McFadden Act was to restrict |

| |interstate bank branching. |

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| |T F |

|Leave blank | |

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| |2-29 The primary objective of the 1933 Glass-Steagall Act was to prevent |

| |commercial banks from competing directly with commercial insurance |

| |companies. |

| |T F |

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| |2-30 The DIDMCA of 1980 and the DIA of 1982 were the initial acts to |

| |begin the deregulation of the commercial banking industry. |

| |T F |

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| |Chapter Three |

| |The Financial Services Industry: Insurance Companies |

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| |3-1 In recent years, the total assets of insurance companies in the U.S. have |

| |been decreasing. |

| |T F |

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| |3-2 The process of life insurance uses risk pooling to transfer income-related uncertainties from a group of |

| |individuals to an insured individual. |

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| |T F |

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| |3-3 Adverse selection is a situation where customers who most need insurance are more likely to apply for insurance. |

| |T F |

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| |3-4 Term life insurance includes a savings element as well as the pure insurance element. |

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| |T F |

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| |3-5 In group life insurance, lower rates can be offered because of cost economies as a result of mass administration of|

| |plans and reduced selling and commission costs. |

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| |T F |

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