Banking and Fintech Exam 1

As of August 15, 2017, what percentage of the Indian population utilizes the Aadhaar card program? Question options: 1)45% 2)70% 3)15% 4)35% 5)88%

5)88%

What are the components of the Financial System?

- Financial Markets - Borrowers/Net Spenders - Financial Intermediaries - Lenders/Net Savers

Top Fintech Hubs in the World

- London - Singapore - New York

How many prices would there be in a barter economy with 100 goods? Question options: 1)4,950 2)100 3)1,000 4)10,000

1)4,950

What are the key characteristics of money?

- Durability - Portable - Divisible - Hard to Counterfeit - Must be generally accepted by a population - Valuable

What are the components of the "Gig" economy

- Independent workers paid by the gig - Consumers who need a specific service - Companies that connect the worker to the consumer in a direct manner

What are the key functions of money?

- Medium of Exchange - Unit of Account - Store of Value - Standard of Deferred Payment

What are three standard features of bonds?

- Par value - Coupon Rate - Term to maturity

What is a wet signature? Question options: 1)signature on art by a painter 2)signature in cement or a wet surface 3)signature on a check 4)signature that cannot be copied at all 5)a signature used to uniquely identify an individual's bank account

.. 5?

Which of the follow term is defined by one party possesses greater knowledge than another in an economic transaction? Question options: 1) Asymmetric Information 2) Machine Learning 3) Artificial Intelligence 4) Informational Imbalance 5) None of the above

1) Asymmetric Information

Which of the following statements is true? Question options: 1) If interest rates fall, there will be more demand for goods. This will cause sellers to increase their prices. 2) If interest rates rise, there will be less demand for goods. This will cause sellers to increase their prices. 3) If interest rates fall, there will be less demand for goods. This will cause sellers to decrease their prices. 4) If interest rates rise, there will be more demand for goods. This will cause sellers to increase their prices. 5) If interest rates fall, there will be more demand for goods. This will cause sellers to decrease their prices.

1) If interest rates fall, there will be more demand for goods. This will cause sellers to increase their prices.

What is it called when banks block high risk customers due to their industry, location or circumstance? Question options: 1) New redlining 2) Exiling 3) Flow monitoring 4) Regulating 5) Enforcing

1) New redlining

Which of the following is not a critical element for Fintech regulation strategies? Question options: 1) Overlapping mandates 2) Principles-based, data-driven supervision 3) Digitally-native regulation 4) Machine-executable regulation 5) AML network monitoring

1) Overlapping mandates

In an article, "Preparing for the Next Black Swan" (Wall Street Journal, Aug 21, 2010), the point is made that diversification may be insufficient in protecting one's portfolio during a "Black Swan" event. Why may this be TRUE? Question options: 1) Virtually all asset classes may decline at the same time. 2) Investors may be unable to buy different assets during a "Black Swan" event. 3) Some assets may rise while others decline during a "Black Swan" event. 4) Black Swan events are surprises and thus one cannot prepare for such an event.

1) Virtually all asset classes may decline at the same time.

The supply curve for bonds would decline due to Question options: 1) an increase in expected inflation. 2) an increase in wealth. 3) a decrease in the riskiness of bonds relative to other assets. 4) an increase in the expected return on bonds.

1) an increase in expected inflation.

Economists believe that as a saver's wealth increases, the saver will generally Question options: 1) increase the fraction of wealth held as common stock. 2) increase his or her holdings of all assets proportionately. 3) decrease the fraction of wealth held as corporate bonds. 4) increase the fraction of wealth held as cash.

1) increase the fraction of wealth held as common stock.

An increase in the price level will result in a(n) ________ in the demand for money and cause the nominal interest rate to ________. Question options: 1) increase; increase 2) decrease; decrease 3) decrease; increase 4) increase; decrease

1) increase; increase

In an effort to increase government revenue, Congress and the president decide to increase the corporate profits tax. The likely result will be Question options: 1) the supply curve for bonds shifts to the left. 2) the equilibrium interest rate rises. 3) the demand curve for bonds shifts to the left. 4) the equilibrium price of bonds falls.

1) the supply curve for bonds shifts to the left.

According the University of Chicago, approximately what percentage laundered money is successfully seized? Question options: 1)0.2% 2)6% 3)14% 4)34% 5)43%

1)0.2%

Which of the following is the traditional savings capability used by incumbent banks? Question options: 1)APR based 2)Day-to-day behavior modifying apps 3)Credit based on buying patterns 4)Social media interactions 5)None of the above

1)APR based

What was the contribution that Medici Family gave to the modern Banking system? 1)Arguably created the formal structure of the banking system by contributing to the idea of a currency as an exchange. 2)Arguably the created the dollar as we know it today. And banking systems have not changed since then. 3)The modern way consumers transfer money between each other is based on a model established by Medici Family 4)Medici Family contributed to the medicine field instead of the banking system 5)None of the above

1)Arguably created the formal structure of the banking system by contributing to the idea of a currency as an exchange.

The engineering and design concept called ______ which take problems back to the constitute components, right back to the physics of the design. 1)First principles 2)Second principles 3)Design-by-analogy 4)Derivative design 5)Frames design

1)First principles

Which family is largely attributed as having invented modern banking? 1)Medici Family 2)Garibaldi Family 3)Dolce Family 4)Berlusconi Family 5)Armani Family

1)Medici Family

What was the necessity to implement KYC and AML? Question options: 1)To stop money laundering and terrorist financing. 2)To establish a well-balanced record of transfers between countries 3)To unify actions against the black market and counterfeit 4)To set a main financial institution capable of regulate currencies and avoid future financial crisis 5)To stop terrorist financing and black markets.

1)To stop money laundering and terrorist financing.

Barter is Question options: 1)an exchange of goods and services directly for goods and services. 2)the basis for economic specialization. 3)another name for money. 4)the main system of exchange in the United States today.

1)an exchange of goods and services directly for goods and services.

Automatic teller machines and debit cards are examples of Question options: 1)electronic funds transfer systems. 2)legal tender in the United States. 3)commodity monies. 4)modern barter systems.

1)electronic funds transfer systems.

Ordinary (non-securitized) loans cannot be resold after they have been granted by a bank or another lender. Therefore, these loans are 1)financial assets but not financial securities. 2)neither financial assets nor financial securities. 3)financial securities but not financial assets. 4)both financial assets and financial securities.

1)financial assets but not financial securities.

FinTech offers a lot to consumers by taking risk to provide: Question options: 1)transparency and lower costs, better solutions than big banks and helping those who are underbanked. 2)a focus on big banks and their services. 3)services only to consumers who are well established in the banking industry. 4)both answers a and b are correct. 5)None of the answers listed above are correct.

1)transparency and lower costs, better solutions than big banks and helping those who are underbanked.

What is the price of a $1000 par value bond with a coupon rate of 7.5% (semi-annual payments) that matures in 19 years, assuming that the bond's YTM is 6.52% p.a.?

1,105.89

All of the following are true in Sweden EXCEPT Question options: 1)many branches of Sweden's banks do not accept cash deposits. 2)the government no longer issues paper currency. 3)many churches encourage parishioners to make donations using a mobile banking app. 4)some stores have stopped accepting cash payments.

2)the government no longer issues paper currency.

Which of the following Cryptocurrencies utilizes the DAO code to self-regulate? Question options: 1) Bitcoin 2) Ethereum 3) Ripple 4) Tether 5) Dogecoin

2) Ethereum

Creditworthiness is linked to everything except: Question options: 1) Wealth 2) Fund distribution 3) Operation of society 4) Governance of society 5) None of the above

2) Fund distribution

What is India's leading mobile wallet company? Question options: 1) WeChat 2) PayTM 3) Alipay 4) Apple Pay 5) Google Wallet

2) PayTM

Which of the following statements about the rate of return is NOT correct? Question options: 1) The total rate of return may be greater or less than the rate of capital gain. 2) The total rate of return may never be negative. 3) The total rate of return may be greater or less than the current yield. 4) The total rate of return is greater than the coupon, holding everything else constant.

2) The total rate of return may never be negative.

If expected inflation declines by 2%, what should happen to nominal interest rates according to the Fisher effect? Question options: 1) double in size 2) fall by 2% 3) rise by 2% 4) be cut in half

2) fall by 2%

A rise in interest rates will do all of the following except: Question options: 1) decrease spending. 2) increase economic growth. 3) decrease asset prices. 4) decrease supply demanded. 5) increase borrowing costs.

2) increase economic growth.

The price of a financial asset equals the Question options: 1) difference between the future value and present value of all payments. 2) present value of all future payments. 3) sum of all payments. 4) future value of all payments.

2) present value of all future payments.

What does raising the interest rate result in? Question options: 1)Recession 2)Inflation 3)Cost of borrowing is less 4)More spending 5)None of the above

2)Inflation

In comparing money to shares of Apple stock, we can say that Question options: 1)shares of Apple stock are a store of value, but money is not. 2)both money and shares of Apple stock are stores of value. 3)money is a store of value, but shares of Apple stock are not. 4)neither money nor shares of Apple stock are stores of value.

2)both money and shares of Apple stock are stores of value.

The interest rate on loans made by peer-to-peer lenders tends to be Question options: 1)higher than the interest rate on bonds and higher than the interest rate on credit cards. 2)higher than the interest rate on bonds and lower than the interest rate on credit cards. 3)lower than the interest rate on bonds and higher than the interest rate on credit cards. 4)lower than the interest rate on bonds and lower than the interest rate on credit cards.

2)higher than the interest rate on bonds and lower than the interest rate on credit cards.

A "primary market" is a market Question options: 1)for government securities. 2)in which newly issued claims are sold to buyers by borrowers. 3)for debt by large or "primary" corporations. 4)in which newly issued claims are sold by savers to borrowers.

2)in which newly issued claims are sold to buyers by borrowers.

Over the centuries, banks have traditionally provided these three core key pieces of utility EXCEPT _____. Question options: 1) A value Store 2) Access to credit 3) Currency creation 4) Money Movement 5) None of the above

3) Currency creation

As wealth increases in the economy, we would expect to observe Question options: 1) bond prices and interest rates both rise. 2) bond prices and interest rates both fall. 3) bond prices rise and interest rates fall. 4) bond prices fall and interest rates rise.

3) bond prices rise and interest rates fall.

An increase in expected inflation will Question options: 1) decrease the nominal interest rate on both short-term and long-term bonds. 2) increase the nominal interest rate on short-term bonds but not affect the nominal interest rate on long-term bonds. 3) increase the nominal interest rate on both short-term and long-term bonds. 4) increase the nominal interest rate on long-term bonds but not affect the nominal interest rate on short-term bonds.

3) increase the nominal interest rate on both short-term and long-term bonds.

If bond investors think they lack enough details to evaluate the likelihood of defaults on certain bonds, this will result in higher Question options: 1) expected inflation. 2) liquidity. 3) information costs. 4) expected return.

3) information costs.

Issuers of coupon bonds Question options: 1) make a single payment of principal at the time the bond is issued and multiple payments of interest over the life of the bond. 2) make multiple payments of principal, but a single payment of interest. 3) make a single payment of principal when the bonds matures, but multiple payments of interest over the life of the bond. 4) make a single payment of interest and principal.

3) make a single payment of principal when the bonds matures, but multiple payments of interest over the life of the bond.

An investor who bases the decision to buy an asset solely on the expected return of an asset is considered to be Question options: 1) risk averse. 2) risk avoiding. 3) risk neutral. 4) risk loving.

3) risk neutral

The bond demand curve slopes down because Question options: 1) interest rates decline as bond prices decline. 2) when bond prices are low, inflation is low. 3) the lender is willing and able to purchase more bonds when the price of the bond is low. 4) the borrower is willing and able to purchase more bonds when the price of the bond is low

3) the lender is willing and able to purchase more bonds when the price of the bond is low.

For a specific change in the yield to maturity Question options: 1) the shorter the time until a bond matures, the greater will be the change in its price. 2) the shorter the time until a bond matures, the greater will be the change in its coupon rate. 3) the longer the time until a bond matures, the greater will be the change in its price. 4) the longer the time until a bond matures, the greater will be the change in its par value.

3) the longer the time until a bond matures, the greater will be the change in its price.

A one-year discount bond with a par value of $1,000 sold today, at issuance, for $943 has a yield to maturity of Question options: 1)4.30%. 2)9.43%. 3)6.04%. 4)5.70%.

3)6.04%.

What did Steve Jobs carry around the Apple offices to remind people of the need for simplicity? 1)A toy car 2)A book 3)A block of wood 4)An iPhone 5)A brick

3)A block of wood

Which firm is on the way to becoming the largest single financial institution in the world? Question options: 1)Apple 2)Tencent 3)Ant Financial 4)Baidu 5)Union Pay

3)Ant Financial

Current banking regulation is supposed to be.? Question options: 1)Financially Inclusive 2)Capable to adapt to new technologies 3)Risk-averse, or rigid 4)Able to identify new market trends 5)Flexible

3)Risk-averse, or rigid

Which of the following is NOT a financial asset? Question options: 1)a home mortgage loan 2)a bond issued by Google 3)Wells Fargo Bank 4)a certificate of deposit

3)Wells Fargo Bank

Monetary policy refers to the government's Question options: 1)decisions on how much money to collect in taxes. 2)plans for retiring the national debt. 3)management of the money supply and interest rates to achieve macroeconomic objectives. 4)decisions on how much money to spend.

3)management of the money supply and interest rates to achieve macroeconomic objectives.

Economists define risk as Question options: 1)the ease with which an asset can be exchanged for other assets or for goods and services. 2)the difference between the return on common stock and the return on corporate bonds. 3)the chance that the value of financial assets will change from what you expect. 4)the difference between the interest rate borrowers pay and the interest rate lenders receive.

3)the chance that the value of financial assets will change from what you expect.

Andy can't make a deal with Danny. Andy has an Alex Rodriguez baseball card and would like to trade it to Danny for Danny's Albert Pujols card, but Danny doesn't want an Alex Rodriguez card. Andy's problem illustrates the drawback to a barter system known as Question options: 1)the many prices problem. 2)the specialization problem. 3)the double coincidence of wants problem. 4)the transactions problem.

3)the double coincidence of wants problem.

At an interest rate of 6%, how much will need to be invested today to have $10,000 in 5 years? Question options: 1) $5,000 2) $13,382 3) $10,000 4) $7,473

4) $7,473

Which company does this motto belong to: _______ is a bank that makes life easier, not harder. We are building a smart bank on your smartphone. Question options: 1) Moven 2) Atom Bank 3) Simple 4) Monzo 5) SmartBank

4) Monzo

The demand curve for bonds would be reduced by Question options: 1) an increase in wealth. 2) a decrease in expected returns on other assets. 3) an increase in the liquidity of bonds relative to other assets. 4) an increase in the information costs of bonds relative to other assets.

4) an increase in the information costs of bonds relative to other assets.

Which of the following will cause the money demand curve to shift to the right? Question options: 1) an increase in the nominal interest rate 2) a decrease in the supply of money 3) a decrease in real GDP 4) an increase in the price level

4) an increase in the price level

The coupon rate is the Question options: 1) coupon paid every 6 months divided by par value. 2) difference between the face value of the bond and its par value. 3) annual coupon payment divided by the market value of the bond. 4) annual coupon payment divided by the face value of the bond.

4) annual coupon payment divided by the face value of the bond.

As a result of the perceived riskiness of alternative investments following the financial crisis of 2007-2009, the bond market was affected in all of the following ways EXCEPT Question options: 1) lower nominal interest rates. 2) higher demand for bonds. 3) higher price of bonds. 4) higher real interest rates.

4) higher real interest rates.

When nominal interest rates fall on financial assets such as U.S. Treasury bills, the amount of interest that households and firms Question options: 1) lose or gain by holding money does not change. 2) lose by holding money increases. 3) gain by holding money decreases. 4) lose by holding money decreases.

4) lose by holding money decreases.

If not to become a bank, why did Uber launch it's own debit card? Question options: 1) To create confusion in the market 2) Uber saw the way FinTech were thriving and wanted a piece of the pie 3) The "made up" concept of money disgusted them 4) so that they could onboard drivers faster to grow their business 5) to charge drivers a fee for using an outside bank for payments

4) so that they could onboard drivers faster to grow their business

If the government increases taxes while holding expenditures constant Question options: 1) the government's deficit will increase. 2) government borrowing will be increased. 3) the bond supply curve will shift to the right and the real interest rate will fall. 4) the bond supply curve will shift to the left and the equilibrium interest rate will fall.

4) the bond supply curve will shift to the left and the equilibrium interest rate will fall.

A decrease in expected inflation Question options: 1) will shift the supply curve for loanable funds to the left. 2) will shift the bond demand curve to the left. 3) results in increased nominal capital gains on physical assets. 4) usually leads to falling nominal interest rates.

4) usually leads to falling nominal interest rates.

What is the term utilized to describe innovation from the scratch vs building upon well-known principles and 1)"Derivative thinking" 2)Design by analogy 3)"Basic thinking" 4)"First Principle thinking" 5)Prime designing

4)"First Principle thinking"

The population of the United States living on the fringes of the financial system is as high as: Question options: 1)20 million 2)50 million 3)100 million 4)130 million 5)200 million

4)130 million

What country uses Alipay and WeChat almost exclusively for mobile payments? Question options: 1)France 2)United States of America 3)India 4)China 5)Great Britain

4)China

What is the term for digital currency that uses encryption? Question options: 1)Bitcoin 2)Ethereum 3)Blockchain 4)Cryptocurrency 5)Insurtech

4)Cryptocurrency

The financial crisis of 2007-2009 worsened after the failure of which firm? Question options: 1)Bear Stearns 2)General Motors 3)American International Group (AIG) 4)Lehman Brothers

4)Lehman Brothers

Which of the following is a form of e-money? Question options: 1)gold 2)an American Express card 3)traveler's checks 4)PayPal

4)PayPal

Which one of the following is not included in a typical regulatory structure? Question options: 1)Government & Policy Makers 2)Examiners & Supervisory Authorities 3)Analysis, Market Risk, Legal, and Q&A Divisions 4)Regulatory & Judicial Board 5)Fraud, Financial Crime & Prosecution Arm

4)Regulatory & Judicial Board

Which of the following is NOT an important criterion for whether a good will be usable as a medium of exchange? Question options: 1)The good must be durable so that value is not lost through product spoilage. 2)The good must be of standardized quality. 3)The good must be valuable relative to its weight. 4)The good must have value even if it were not being used as money.

4)The good must have value even if it were not being used as money.

The difference between money and income is that whereas income is an individual's Question options: 1)stock of currency and currency substitutes, money is an individual's stock of all assets. 2)flow of earnings over a period of time, money is an individual's stock of all assets. 3)stock of all assets, money is an individual's stock of currency and currency substitutes. 4)flow of earnings over a period of time, money is an individual's stock of currency and currency substitutes.

4)flow of earnings over a period of time, money is an individual's stock of currency and currency substitutes.

Since the year 2000, total currency in circulation Question options: 1)has fallen by 20 percent. 2)has increased tenfold. 3)has remained essentially the same. 4)has more than tripled.

4)has more than tripled.

Financial securities that represent partial ownership of a corporation are known as Question options: 1)dividends. 2)coupons. 3)bonds. 4)stocks.

4)stocks.

"Bank 4.0": Question options: 1) Tailors banking to the individual 2) Will make traditional banking obsolete 3) Will combine technology and banking 4) Removes friction and enables utility 5) All of the above

5) All of the above

Which of the following are disruptors that are encouraging the FinTech revolution? Question options: 1) The growing acceptance of online shopping. 2) Artificial Intelligence. 3) New trading platforms. 4) Insurance products. 5) All of the above.

5) All of the above.

Which of the following affects the FinTech industry? Question options: 1) The growth of online shopping. 2) A shifting balance of power that swings from banks and other financial services. 3) Development of insurance products. 4) Artificial intelligence. 5) All the above

5) All the above

FinTech has changed money transferring services in all of the following ways EXCEPT: Question options: 1)ability to transfer money instantly. 2)lower rates per transfer. 3)ability to transfer to money to more countries. 4)ability to transfer money to the unbanked. 5)created fewer online opportunities to transfer money.

5)created fewer online opportunities to transfer money.

What is the price of a $1000 par value bond with a coupon rate of 5.7% (annual payments) that matures in 20 years, assuming that the bond's YTM is 8.45% p.a.?

738.81

Assume you deposit $4,710 into an account that pays interest of 7.65% p.a.. How much money will be in your account exactly 40 years from today?

89,863.28

Net Interest Income Formula

Interest earned on loan - interest paid on deposit accounts

Which of the following isn't a problem with modern signature based security for bank forms? Question options: 1) Not truly unique 2) Aren't regularly verified 3) Easily copied 4) Banks often trust the first signature that they get 5) It is physically there/not digital

It is physically there/not digital

Interest Rate Facts

Long term securities have higher interest rates than short term securities More risky securities/loans have higher interest rates than safer

What is "first principles thinking" based in? 1) Derivative design 2) Design-by-analogy 3) Physics of the design 4) Iterative design 5) Imaginative design

Physics of the design