FIN4324 Chapter 1 – Flashcards
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In the United States a commercial bank qualifies as a "bank" under federal law if it offers:
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Checking accounts, commercial loans
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E. F. Hutton, J.C. Penney, and Sears Roebuck are among leading firms that in the1980's organized competitors with banks that are known as:
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Nonbank Banks
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A study of history shows that one of the first services offered by banks was:
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Currency Exchange
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Banks perform the indispensable task of:
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Intermediating between surplus-spending individuals or institutions and deficit-spending individuals or institutions
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The view that depositors hire banks to analyze the financial condition of prospective borrowers and continually evaluate the condition of outstanding loans is referred to as:
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Delegated monitoring
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Which of the following has been an important trend regarding consolidation and geographic expansion in banks?
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A) Increased bank branching activity B) The formation of more holding companies to purchase smaller banks C) Mergers among some of the largest banks in the industry D) A and C above E) All of the above.
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Included among leading structural trends in the U.S. banking industry in recent years are:
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A) The number of independently owned banks has declined B) The average size of individual banking firms has increased C) Entry across state lines from neighboring states has increased D) A and B only E) All of the above.
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Smaller, locally focused commercial and savings banks that offer narrower but more personalized menu of financial services are known as
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Community banks
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The banking services that includes executing buy and sell orders for security trading customers and marketing new securities to raise funds for corporations and other institutions is referred to:
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Investment Banking
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A bank that wires funds for the purchase of a beach house in South Carolina for a customer in Oklahoma is carrying out the __________ of banks.
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The payment role
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Examples of imperfections in the financial system which allow banks to exist include which of the following?
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Informational asymmetry
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A bank which manages the investment portfolio and pays the bills of an elderly customer who is unable to do it for him or herself is carrying out the __________ of banks.
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The agency role
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Which of the following is a trend that has affected all banks today?
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Rising funding costs
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Which of the following is not a current trend in the banking industry?
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The number of bank branches is declining
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Which of the following types of banks would most likely offer the largest number of financial services?
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A universal bank
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The phenomenon of convergence refers to:
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Financial service firms expanding into other product lines
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Bank equipment leasing activity involves:
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A bank buying equipment and then leasing the item to a customer
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Wholesale banks are those banks that:
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Are large banks which serve corporations and government
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Jonathan Robbins has an account in a bank that does not have a physical branch. Jonathan does all of his banking business over the internet. What type of bank does Jonathan have his account at?
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Virtual Bank
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The Edmond National Bank serves only the City of Edmond, Oklahoma and concentrates on providing the best possible service to this city. What type of bank is this most likely to be?
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Community Bank
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The Charleston Southern Bank makes loans for families to purchase new and existing homes but does not take deposits. What type of bank is this most likely to be?
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Mortgage Bank
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Which of the following is considered a fringe bank?
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Payday Lender
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During the middle ages, banks encountered religious opposition because:
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Loans to the poor often carried high interest rates
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70. Religious opposition decreased during the Renaissance because:
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Loans and deposits were primarily for wealthy customers
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71. Banks like the Medici Bank in Italy and the Hochstetter Bank in Germany were successful because and they responded well to these new needs.
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The Industrial Revolution demanded new methods of making payments and obtaining credit
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Early European banks were places for safekeeping of wealth because:
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Savings and wealth were lost due to war, theft and expropriation by governments
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73. The U.S. government wants to prevent money laundering by drug cartels. To promote this goal, they have asked banks to report any cash deposits greater than $10,000 to the government.
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The policy role
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74. The Edmond Wine and Cheese shop wants to buy 30 cases of French Champagne on credit. Bank of America writes a letter of credit stating that the Edmond Wine and Cheese shop is a good risk and that if they do not pay off the loan, Bank of America will. Which of the following roles is the bank performing?
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The guarantor role
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75. Alexander Phua goes to his local bank and gets an insurance policy that protects him against loss in case he is in a car accident. Which of the following roles is the bank performing?
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C) The risk management role
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76. Chris Jones gets a cashier's check from Wachovia Bank to make his down payment on a new home. Which of the following roles is the bank performing?
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The payment role
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77. The Bank, N.A. accepts deposits from thousands of individuals and lends that money to (among others) the Stillwater Body Shop to expand their work bays. Which of the following roles is the bank performing?
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The intermediation role
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78. Major trends affecting the performance of financial firms today include all of these except:
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Reduced branching
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79. The First National Bank of Lakeland makes risky loans to business to expand and grow their businesses while at the same time accepting funds into checking accounts that are insured by the FDIC. Which of the following services is this bank offering to their customers?
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Risky arbitrage services
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80. Jonathan Wynn knows that if he wanted to purchase a Treasury Bill, the minimum amount he would spend would be close to $10,000. He also knows that he could deposit $1,000 in a money market deposit account at a bank and earn about the same rate of interest. Jonathan does not have $10,000 to invest in a Treasury Bill. If Jonathan puts his money in the bank, which service that a bank can provide is he taking advantage of?
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Divisibility of money services
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81. Nick Rodr gets a loan from the First State Bank of Guthrie to purchase a new refrigerator for his condo. What service that a bank provides is he taking advantage of?
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Credit services
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82. Drew Davis goes to his local bank to get help developing a financial plan and making investment decisions. Which of the more recent services banks offer is Drew taking advantage of?
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Getting financial advice
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83. The Bartholemew Bakery receives a lot of payments in cash. They deposit it in their local bank who invests the money in an interest bearing account until it is needed to pay bills. Which of the financial services banks offer is the Bartholemew bakery taking advantage of?
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Managing cash
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84. MyWebCast is a new company that makes it easy for individuals to create streaming videos on the internet to share with friends and family for a small fee. MyWebCast wants to expand their offerings of video streaming services but needs cash to be able to do this. The Second National Bank of Oklahoma City, through a subsidiary, gives them the cash they need for an ownership share in the company. Which of the more recent services that banks offer is MyWebCast taking advantange of?
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Getting venture capital services
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85. Chandriga Suppiah has opened a Roth IRA with North Carolina State Bank and plans on making regular contributions to this account until she retires. Which of the financial services is Chandriga taking advantage of?
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Buying a retirement plan
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86. Banks with less than ___________in assets are generally called community banks.
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B) Less than $1 billion
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87. The principal functions and services offered by many financial-service firms today include:
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A) Lending and investing money B) Making payments of behalf of customers to facilitate their purchases of goods and services C) Managing and protecting customers' cash and other property D) Assisting customers in raising and investing funds profitably E) All of the above
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88. Which of the following is considered a depository financial institution?
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C) Savings and Loan associations
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89. Which of the following is not a purpose of bank regulation:
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A) Guarantee minimal profitability of the banking system
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90. During the financial crisis of 2007-2009, the collapse of Lehman Brothers and the bailout of Bear Stearns reaffirmed the importance of the fundamental principle of:
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Public trust and confidence in the system
