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Finance
Q:
Diversification reduces risk because prices of different securities do not move exactly together.
Q:
The number of bank charters issued annually in the United States has averaged about:
A) 1000
B) 2000
C) 10
D) 100
E) None of the above
Q:
The standard statistical measures of spread are beta and covariance.
Q:
According to the authors, a reasonable range for the risk premium in the United States is 5% to 8%.
Q:
One of the benefits of securing a federal (national) bank charter instead of a state bank charter is:
A) Federal rules can pre-empt state laws
B) It is generally easier and less costly to secure a federal charter
C) It is often able to lend a higher percentage of its capital and surplus to a single borrower
D) Lower supervisory fees
E) None of the above.
Q:
One of the benefits of securing a state bank charter instead of a federal bank charter is:
A) It brings added prestige
B) It results in the automatic receipt of federal deposit insurance
C) It is often able to lend a higher percentage of its capital and surplus to a single borrower
D) A state bank must join the Federal Reserve System
E) None of the above.
Q:
For log-normally distributed returns the annual geometric average return is greater than the arithmetic average return.
Q:
U.S. banking laws require the organizers of a proposed new bank to demonstrate:
A) Adequate future earnings prospects
B) Adequate owners' capital will be available
C) Evidence of a public need for a new bank
D) Existing banks will not be endangered
E) All of the above.
Q:
Risk premium is the difference between the security return and the Treasury bill return.
Q:
Treasury bills have provided the highest average return, both in nominal terms and in real terms, between 1900-2006.
Q:
The of a new ATM is the present value of the future stream of cash savings discounted at the firms required rate of return less the total cash outlay for the ATM.
Q:
What is the beta of a security where the expected return is double that of the stock market, there is no correlation coefficient relative to the US stock market and the standard deviation of the stock market is .18?
A. 0.00
B. 1.00
C. 1.25
D. 2.00
Q:
New depository institutions are required to have insurance from the .
Q:
The covariance between YOHO stock and the S&P 500 is .05. The standard deviation of the stock market is 20%. What is the beta of YOHO?
A. 0.00
B. 1.00
C. 1.25
D. 1.42
Q:
The correlation coefficient between stock B and the market portfolio is 0.8. The standard deviation of the stock B is 35% and that of the market is 20%. Calculate the beta of the stock.
A. 1.0
B. 1.4
C. 0.8
D. 0.7
Q:
Another name for a new financial institution is .
Q:
For most of the history of financial service providers, convenience has meant .
Q:
50. The annual return for three years for stock B comes out to be 0%, 10% and 26%. Annual returns for three years for the market portfolios are +6%, 18%, 24%. Calculate the beta for the stock.
A. 0.74
B. 1.36
C. 1.0
D. None of the above
Q:
The beta of Nestle measured relative to its home market is:
A. 0.17
B. 1.54
C. 1.01
D. none of the above
Q:
For each additional 1% change in the market return, Amazon stock return on the average changes by:
A. 1.26%
B. 1.59%
C. 2.2%
D. None of the above
Q:
____________________________________________ will allow customers to carry pocket-sized terminals with them and pay for goods and services and transfer funds as needed from this pocket terminal. These are already popular in Europe.
Q:
The beta of market portfolio is:
A. + 1.0
B. +0.5
C. 0
D. -1.0
Q:
An)______________________ is a bank that offers its services only through the Internet. It does not have any brick and mortar offices.
Q:
____________________________________________ reduces a bank's overall risk exposure by establishing service facilities in different market areas.
Q:
The "beta" is a measure of:
A. Unique risk
B. Total risk
C. Market risk
D. None of the above
Q:
In the case of a portfolio of N-stocks, the formula for portfolio variance contains:
A. N covariance terms
B. N(N - 1)/2 covariance terms
C. N2 covariance terms
D. None of the above
Q:
In the case of a portfolio of N-stocks, the formula for portfolio variance contains:
A. N variance terms
B. N(N - 1)/2 variance terms
C. N2 variance terms
D. None of the above
Q:
For a two-stock portfolio, the maximum reduction in risk occurs when the correlation coefficient between the two stocks is:
A. +1
B. -0.5
C. -1
D. 0
Q:
If the covariance between stock A and stock B is 100, the standard deviation of stock A is 10% and that of stock B is 20%, calculate the correlation coefficient between the two securities.
A. -0.5
B. +1.0
C. +0.5
D. None of the above
Q:
The range of values that correlation coefficients can take can be:
A. zero to +1
B. -1 to +1
C. - infinity to +infinity
D. zero to + infinity
Q:
37. If the correlation coefficient between stock C and stock D is +1.0% and the standard deviation of return for stock C is 15% and that for stock D is 30%, calculate the covariance between stock C and stock D.
A. +45
B. -450
C. +450
D. None of the above
Q:
Banks which offer services from inside grocery stores and other retail outlets are offering services from a(n)______________________ branch.
Q:
______________________ is demonstrated by organizers of new banks by showing that local banks are not conveniently located or fail to offer some key services.
Q:
Stock P and stock Q have had annual returns of -10%, 12%, 28% and 8%, 13%, 24% respectively. Calculate the covariance of return between the securities.
A. -149
B. +149
C. 100
D. None of the above
Q:
Stock M and Stock N have had the following returns for the past three years of -12%, 10%, 32%; and 15%, 6%, 24% respectively. Calculate the covariance between the two securities.
A. -99
B. +99
C. +250
D. None of the above
Q:
As the number of stocks in a portfolio is increased:
A. Unique risk decreases and approaches to zero
B. Market risk decreases
C. Unique risk decreases and becomes equal to market risk
D. Total risk approaches to zero
Q:
Stock A has an expected return of 10% per year and stock B has an expected return of 20%. If 40% of the funds are invested in stock A, and the rest in stock B, what is the expected return on the portfolio of stock A and stock B?
A. 10%
B. 20%
C. 16%
D. None of the above
Q:
The state banking commissions (at the state level) and the Office of the Comptroller of the Currency (at the federal level) are the only ones able to issue a(n)______________________ for a new U.S. bank.
Q:
Market risk is also called:
I) systematic risk, II) undiversifiable risk, III) firm specific risk.
A. I only
B. II only
C. III only
D. I and II only
Q:
The unique risk is also called the:
A. Unsystematic risk
B. Diversifiable risk
C. Firm specific risk
D. All of the above
Q:
Which of the following is not an advantage of ATMs?
A) A limited commitment of resources
B) Lower cost per transaction
C) Personalized service
D) Lower staffing needs
E) Geographic accessibility
Q:
The type of the risk that can be eliminated by diversification is called:
A. Market risk
B. Unique risk
C. Interest rate risk
D. Default risk
Q:
The First National Bank is proposing to take over The Second State Bank, to form The First National MegaBank, which will be a national bank. Which regulatory agency must approve the merger?
A) Office of the Comptroller of the Currency
B) Federal Deposit Insurance Corporation
C) The state banking board
D) Federal Reserve
E) U.S. Treasury
Q:
A statistical measure of the degree to which securities' returns move together is called:
A. Variance
B. Correlation Coefficient
C. Standard Deviation
D. None of the above
Q:
The First State Bank is proposing to acquire The Second National Bank, to form The First State MegaBank, which will be a state member bank (a member of the Federal Reserve System) and carry federal deposit insurance. Which regulatory agency must approve the merger?
A) Office of the Comptroller of the Currency
B) Federal Deposit Insurance Corporation
C) The state banking board
D) Federal Reserve
E) U.S. Treasury
Q:
The Fred National Bank is thinking about adding a branch office on the west side of town. The Fred National Bank has done a survey and has discovered that the mean household income in the area is $76,000 per year. Which factor would this address when considering to add a new branch?
A) Number of retail shops
B) Average income level of households
C) Ratio of population to branches
D) Number of service facilities operated by financial service competitors
E) Population density
Q:
The standard deviation of the UK market during the period from 2001 through 2006 was: (Approximately)
A. 12.3%
B. 14.1%
C. 9.8%
D. None of the above
Q:
The Jones State Bank is thinking about adding a branch office on the west side of Edmond, Oklahoma. Jones State Bank has done a survey of local residents near the area where they want to build and has discovered that most residents are in their 50s and 60s. Which factor would this address when considering whether to add a new branch?
A) Traffic count
B) Number of retail shops
C) Average age of the local population
D) Population Density
E) Population Growth
Q:
What has been the standard deviation of returns of common stocks during the period between 1900 and 2006?
A. 19.8%
B. 33.4%
C. 8.1%
D. 7.8%
Q:
Which portfolio had the highest standard deviation during the period between 1900 and 2006?
A. Common stocks
B. Government bonds
C. Treasury bills
D. None of the given answers
Q:
The Jones State Bank is thinking about adding a branch office on the west side of Edmond, Oklahoma. Jones State Bank has discovered that area surrounding the proposed site averages 4 houses per acre and has several subdivisions that each have 300 to 400 homes. Which factor would this address when considering whether to add a new branch?
A) Traffic count
B) Number of retail shops
C) Average age of the local population
D) Population Density
E) Population Growth
Q:
Sun Corporation has had returns of -6%, 16%, 18%, and 28% for the past four years. Calculate the standard deviation of the returns.
A. 11.6%
B. 14.3%
C. 13.4 %
D. None of the above
Q:
The Jones State Bank is thinking about adding a branch office on the west side of Edmond, Oklahoma. Jones State Bank has done a study and found that the site where they want to build sees 35,000 cars pass in an average day. Which factor would this address when considering whether to add a new branch?
A) Traffic count
B) Number of retail shops
C) Average age of the local population
D) Population Density
E) Population Growth
Q:
Macro Corporation has had the following returns for the past three years, -10%, 10%, and 30%. Calculate the standard deviation of the returns.
A. 10%
B. 20%
C. 30%
D. None of the above
Q:
The Jones State Bank is thinking about adding a branch office on the west side of Edmond, Oklahoma. Growth of new homes in the area has averaged 15% per year over the last five years and is expected to continue at that rate in the future. Which factor would this address when considering whether to add a new branch?
A) Traffic count
B) Number of retail shops
C) Average age of the local population
D) Population Density
E) Population Growth
Q:
Mega Corporation has the following returns for the past three years: 8%, 12% and 10%.
Calculate the variance of the return and the standard deviation of the returns.
A. 64 and 8%
B. 124 and 11.1%
C. 4 and 2%
D. None of the above
Q:
What categories do authentication factors generally fall in?
A) Something a customer knows
B) Something a customer has
C) Something a customer is
D) All of the above
E) None of the above
Q:
Which of the following countries had the highest risk premium?
A. Germany
B. Denmark
C. Italy
D. None of the above
Q:
Which of the following would not be a telephone service a customer could get from a bank call center?
A) The current balance on their account
B) A fax copy of a loan application for the bank
C) A Verification of what transactions have passed through the account
D) Access to their safety deposit box
E) All of the above are telephone services a customer could get from a bank call center
Q:
Which of the following countries had the lowest risk premium?
A. U.S.A
B. Denmark
C. Italy
D. none of the above
Q:
The Cassil National Bank charges their customers $.50 per transaction for using the ATM machine if their deposit balance is below $500. They charge $.25 per transaction for using the ATM if their deposit balance is between $500 and $1000. If their customers deposit balance is over $1000, there is no charge for using the ATM machine. This is an example of:
A) An interchange fee
B) An independent pricing schedule
C) A conditional pricing schedule
D) A surcharge fee
E) None of the above
Q:
Given the following data: risk-free rate = 4%, average risk premium = 7.7%.
Calculate the required rate of return:
A. 5.6%
B. 7.6%
C. 11.7%
D. None of the given answers
Q:
A financial holding companies (FHC), defined as a special type of holding company that may offer the broadest range of financial services such as securities and insurance activities, were allowed under which act?
A) Riegle-Neal Interstate Banking and Branching Efficiency Act
B) The Competitive Equality in Banking Act
C) The Basel Agreement
D) The FDIC Improvement Act
E) The Gramm-Leach-Bliley Financial Services Modernization Act
Q:
Which of the following provides a correct measure of the opportunity cost of capital regardless of the timing of the cash flows?
A. Arithmetic average
B. Geometric average
C. Hyperbolic mean
D. None of the above
Q:
Nonbank financial firms that supply insurance coverage to customers borrowing money to guarantee repayment of a loan are referred to as:
A) Merchant Bankers
B) Factoring Companies
C) Savings Associations
D) Investment Bankers
E) Credit Insurance Underwriters
Q:
For log-normally distributed returns the annul compound returns is equal to:
A. the arithmetic average returns minus half the variance
B. the arithmetic average returns plus half the variance
C. the arithmetic average returns minus half the standard deviation
D. the arithmetic average returns plus half the standard deviation
Q:
Banks with less than _______ in assets are generally called community banks.
A) More than $1 billion
B) Less than $1 billion
C) More than $5 million
D) Less than $1 trillion
E) More than $1 trillion
Q:
Spill Oil Company's stocks had -8%, 11% and 24% rates of return during the last three years respectively; calculate the average rate of return for the stock.
A. 8% per year
B. 9% per year
C. 11% per year
D. None of the above
Q:
If the average annual rate of return for common stocks is 11.7%, and for treasury bills it is 4.0%, what is the market risk premium?
A. 15.8%
B. 4.1%
C. 7.7%
D. None of the above
Q:
The gradual evolution of markets and institutions such that geographic boundaries do not restrict financial transactions is known as:
A) Deregulation
B) Integration
C) Re-regulation
D) Globalization
E) Moral suasion
Q:
When financial service providers offer a range of services including banking, insurance and securities services it is known as:
A) Consolidation
B) Convergence
C) Economies of scale
D) E-Efficiencies
E) None of the above
Q:
If the standard deviation is 19.8% and the number of observations is 107, what is the standard error?
A. 4.23 %
B. 1.9%
C. 0.47%
D. None of the above
Q:
Which portfolio has had the highest average risk premium during the period 1900-2006?
A. Common stocks
B. Government bonds
C. Treasury bills
D. None of the given answers
Q:
Which countrys banks were owned by the state until the 1990s?
A) Belgium
B) France
C) Germany
D) Italy
E) None of the above
Q:
Standard error is estimated as:
A. Average annual rate of return divided by the square root of the number of observations
B. Variance divided by the number of observations
C. Standard deviation of returns divided by the square root of the number of observations
D. None of the above
Q:
Of the following countries in Europe, which has the largest number of banks?
A) Belgium
B) France
C) Germany
D) Great Britain
E) None of the above
Q:
Standard error measures:
A. Nominal annual rate of return on a portfolio
B. Risk of a portfolio Reliability of an estimate
C. Reliability of an estimate
D. Real annual rate of return on a portfolio
Q:
The major competitors of banks have:
A) Fewer but much larger service providers
B) Fewer but smaller service providers
C) More but smaller service providers
D) More but larger service providers
E) None of the above
Q:
According to Levonian and Rose in order to achieve some reduction in earnings risk, interstate banks must expand into at least:
A) 2 states
B) 4 states
C) 6 states
D) 10 states
E) 25 states
Q:
Which portfolio had the highest average annual return in real terms between 1900 and 2006?
A. Portfolio of U.S. Common stocks
B. Portfolio of U.S. government bonds
C. Portfolio of Treasury bills
D. None of the given answers