Question 1

Sweep accounts

Accepted Answer

A)  have made reserve requirements nonbinding for many banks.
B)  sweep funds out of deposit accounts into long-term securities.
C)  enable banks to avoid paying interest to corporate customers.
D)  reduce banks' assets.

Question 2

The declining cost of computer technology has made ________ a reality.

Accepted Answer

A)  brick and mortar banking
B)  commercial banking
C)  virtual banking
D)  investment banking

Question 3

The regulatory system that has evolved in the United States whereby banks are regulated at the state level,the national level,or both,is known as a

Accepted Answer

A)  bilateral regulatory system.
B)  tiered regulatory system.
C)  two-tiered regulatory system.
D)  dual banking system.

Question 4

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 Act.

Question 5

Under the Gramm-Leach-Bliley Act states retain regulatory authority over

Accepted Answer

A)  bank holding companies.
B)  securities activities.
C)  insurance activities.
D)  bank subsidiaries engaged in securities underwriting.

Question 6

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 collapse of the Bretton Woods system.
D)  the creation of the World Trade Organization.

Question 7

The government institution that has responsibility for the amount of money and credit supplied in the economy as a whole is the

Accepted Answer

A)  central bank.
B)  commercial bank.
C)  bank of settlement.
D)  monetary fund.

Question 8

The agreement to provide a standardized commodity to a buyer on a specific date at a specific future price is

Accepted Answer

A)  a put option.
B)  a call option.
C)  a futures contract.
D)  a mortgage-backed security.

Question 9

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;10

Question 10

A disadvantage of virtual banks (clicks) is that

Accepted Answer

A)  their hours are more limited than physical banks.
B)  they are less convenient than physical banks.
C)  they are more costly to operate than physical banks.
D)  customers worry about the security of on-line transactions.

Question 11

Lack of competition in the United States banking industry can be attributed to

Accepted Answer

A)  the fact that competition does not benefit consumers.
B)  the fact that branching has eliminated competition.
C)  recent legislation restricting competition.
D)  nineteenth-century populist sentiment.

Question 12

Uncertainty about interest-rate movements and returns is called

Accepted Answer

A)  market potential.
B)  interest-rate irregularities.
C)  interest-rate risk.
D)  financial creativity.

Question 13

Which of the following is NOT part of the shadow banking system?

Accepted Answer

A)  the transformer
B)  the servicer
C)  the bundler
D)  the distributor

Question 14

In this type of arrangement,any balances above a certain amount in a corporation's checking account at the end of the business day are "removed" and invested in overnight securities that pay the corporation interest.This innovation is referred to as a

Accepted Answer

A)  sweep account.
B)  share draft account.
C)  removed-repo account.
D)  stockman account.

Question 15

If a foreign bank operates a subsidiary bank in the U.S. ,the subsidiary bank is

Accepted Answer

A)  subject to the same regulations as a U.S.owned bank.
B)  only subject to the regulations of the country in which the foreign bank is chartered.
C)  restricted to making loans to only foreign citizens in the U.S.
D)  restricted to accepting deposits from foreign citizens living in the U.S.

Question 16

The legislation overturning the Glass-Steagall Act is

Accepted Answer

A)  the McFadden Act.
B)  the Gramm-Leach-Bliley Act.
C)  the Garn-St.Germain Act
D)  the Riegle-Neal Act.

Question 17

Both ________ and ________ were financial innovations that occurred because of interest rate volatility.

Accepted Answer

A)  adjustable-rate mortgages;commercial paper
B)  adjustable-rate mortgages;financial derivatives
C)  sweep accounts;financial derivatives
D)  sweep accounts;commercial paper

Question 18

The legislation that effectively prohibited banks from branching across state lines and forced all national banks to conform to the branching regulations in the state in which they reside is the

Accepted Answer

A)  McFadden Act.
B)  National Bank Act.
C)  Glass-Steagall Act.
D)  Garn-St.Germain Act.

Question 19

The most important developments that reduced banks cost advantages include

Accepted Answer

A)  the growth of the junk bond market.
B)  the competition from money market mutual funds.
C)  the growth of securitization.
D)  the growth in the commercial paper market.

Question 20

Bank customers perceive Internet-only banks as being

Accepted Answer

A)  more secure than physical bank branches.
B)  a better method for the purchase of long-term savings products.
C)  better at keeping customer information private.
D)  prone to many more technical problems.

Exam 11: Banking Industry: Structure and Competition

Under the Gramm-Leach-Bliley Act states retain regulatory authority over

Correct AnswerverifiedShow Answer

The agreement to provide a standardized commodity to a buyer on a specific date at a specific future price is

Correct AnswerverifiedShow Answer

A disadvantage of virtual banks (clicks) is that

Correct AnswerverifiedShow Answer

In this type of arrangement,any balances above a certain amount in a corporation's checking account at the end of the business day are "removed" and invested in overnight securities that pay the corporation interest.This innovation is referred to as a

Correct AnswerverifiedShow Answer

Sweep accounts

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Both ________ and ________ were financial innovations that occurred because of interest rate volatility.

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Which of the following is NOT part of the shadow banking system?

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Bank customers perceive Internet-only banks as being

Correct AnswerverifiedShow Answer

The regulatory system that has evolved in the United States whereby banks are regulated at the state level,the national level,or both,is known as a

Correct AnswerverifiedShow Answer

The legislation that overturned the prohibition on interstate banking is

Correct AnswerverifiedShow Answer

The declining cost of computer technology has made ________ a reality.

Correct AnswerverifiedShow Answer

Lack of competition in the United States banking industry can be attributed to

Correct AnswerverifiedShow Answer

The most important developments that reduced banks cost advantages include

Correct AnswerverifiedShow Answer

The legislation that effectively prohibited banks from branching across state lines and forced all national banks to conform to the branching regulations in the state in which they reside is the

Correct AnswerverifiedShow Answer

The legislation overturning the Glass-Steagall Act is

Correct AnswerverifiedShow Answer

The spectacular growth in international banking can be explained by

Correct AnswerverifiedShow Answer

The government institution that has responsibility for the amount of money and credit supplied in the economy as a whole is the

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

Uncertainty about interest-rate movements and returns is called

Correct AnswerverifiedShow Answer

If a foreign bank operates a subsidiary bank in the U.S. ,the subsidiary bank is

Correct AnswerverifiedShow Answer

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Both and were financial innovations that occurred because of interest rate volatility.

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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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