Chapter 5 - Commercial Bank Management

Historically, most industrial loan companies have operated to: accept deposits. assist their parent company in some facet of the firm's core business. exclusively make commercial loans. increase the safety and soundness of the parent company. purchase municipal securities.

assist their parent company in some facet of the firm's core business.

If a security is a first-time placement for a firm, it is called a(n): initial public offering. first time equity offering. primary offering. secondary offering. seasoned offering.

initial public offering.

BMW Bank is chartered by the: state of Utah. FDIC. Federal Reserve. Office of the Comptroller of the Currency. National Credit Union Administration.

state of Utah

Under FASB 157, Level _______ assets valuation are based on observable market prices for the identical instrument. 1 2 3 4 5

1

Under FASB 157, Level _______ assets valuation are based on observable market prices for similar assets or liabilities. 1 2 3 4 5

2

Under FASB 157, Level _______ assets valuation are based on management's best judgment of what the underlying asset is worth. 1 2 3 4 5

3

Which of the following is not a criticism against granting commerce companies industrial loan company charters? There should be a separation between commerce and banking to protect customers from potential conflicts of interest. Firms could become so large and powerful that they might dominate business in many communities. Industrial loan companies are not subject to the same regulations as commercial banks. All of the above are criticisms against granting commerce companies industrial loan company charters a. and b. only

All of the above are criticisms against granting commerce companies industrial loan company charters

The underwriting process involves all of the following except: helping a firm design a security to meet all legal requirements. identifying potential buyers. pricing the security. selling the security to the market place. All of the above are part of the underwriting process.

All of the above are part of the underwriting process.

During the underwriting process, the investment bank receives payment for all of the following except: flotation costs. legal costs. Federal Reserve costs. accounting costs. marketing costs.

Federal Reserve costs.

Which of the following investment banking services would be classified as an advisory services? Managing investments for governments. Designing an initial public offering Acting as a broker that facilitates security trading Running a hedge fund Proprietary trading

Managing investments for governments.

______________ represent amounts owed by Goldman Group to brokers, the firm's customers, and counter-parties to derivative contracts. Collateralized agreements Financial instruments Collateralized financings Receivables Payables

Payables

____________ represent amounts owed to Goldman Group by brokers, the firm's customers, and counter-parties to derivative contracts. Collateralized agreements Financial instruments Collateralized financings Receivables Payables

Receivables

On Goldman Groups' 2012 balance sheet, Financial Instruments Owned consists of: cash. collateralized agreements. derivative securities. a. and b. a. and c.

a. and c.

Goldman Group listed all of the following key risk faced by the firm in its 2007 annual report except: widening credit spreads.. an increase in the number of securities underwritings. declines in equity values. declines in the number of mergers and acquisitions. an increase in market volatility.

an increase in the number of securities underwritings.

On Goldman Groups' 2012 balance sheet, ___________ consist of securities that Goldman Sachs has loaned under an agreement to repurchase at a later date. collateralized agreements financial instruments collateralized financings receivables payables

collateralized financings

Investment banks generally engage in all of the following types of business activities except: proprietary trading. goodwill recovery. market making. securities underwriting. advisory services

goodwill recovery

A __________ is an investment fund that is limited to a small number of sophisticated investors. money market mutual fund private equity fund risk management fund hedge fund market development fund

hedge fund

When an investment bank stands willing to buy securities from participants who want to sell and to sell securities to participants who want to buy, it is: underwriting. market making. principal investing. proprietary trading. organizing a market.

market making.

Under FASB 157, the valuation of Level 1 assets is labeled: marking to market. marking to matrix. marking to myth. marking to major. marking to minor.

marking to market.

Under FASB 157, the valuation of Level 2 assets is labeled: marking to market. marking to matrix. marking to myth. marking to major. marking to minor.

marking to matrix.

Under FASB 157, the valuation of Level 3 assets is labeled: marking to market. marking to matrix. marking to myth. marking to major. marking to minor.

marking to myth.

The Dodd-Frank Volker Rule: allows commercial and investment banks to merge. prohibits proprietary trading using FDIC insured funds. encourages investing and sponsoring of hedge funds both a. and b. both b. and c.

prohibits proprietary trading using FDIC insured funds.

When an investment bank commits its own funds to take a risk position in an underlying security, it is known as: underwriting. market making. proprietary trading. organizing a market. brokering.

proprietary trading.

If a firm already has stock outstanding that is publically traded, additional offerings are called: initial public offering. second time equity offering. primary offering. secondary offering. flavored offering.

secondary offering.

Mutual of Omaha bank is charted as a: commercial bank. consumer bank. mutual savings bank. thrift. credit union.

thrift.