Macro-Econ

Question 1

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Central bankers work to reduce the volatility of the economic and financial systems by pursuing which (one) of the following specific objectives:

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		Low and stable inflation.
		High and stable real growth, together with high employment.
		Stable financial markets and institutions.
		Stable interest and exchange rates.
		All of the above

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1 points   

Question 2

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The Glass-Steagall Act of 1933:

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		Required commercial banks to sell off their investment banking operations
		Eliminated the FDIC
		Required federally chartered banks to meet the branching restrictions of the states
		Required all state banks to get federal charters

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1 points   

Question 3

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The federal funds rate is the interest rate:

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		The Fed charges banks who borrow from it
		Banks charge each other for overnight loans on their excess deposits at the Fed
		The U.S. Treasury charges banks that need emergency funds
		The FDIC charges banks that need to borrow from it to meet depositor demands

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1 points   

Question 4

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______________are widely used by the banks to meet customers’ need for large-scale and/or high-risk loans and they enable risk sharing among group of banks and enable large and mid-sized regional banks to participate in international lending activities.

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		Note Issuance Facilities (NIF)
		Revolving Credits
		Syndicated Loans
		Euro-credits
		Credit Default Swaps

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1 points   

Question 5

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One thing that is common for all bank loans is that they are:

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		Securitized
		Liquid
		Part of the banks’ assets
		Unsecured

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1 points   

Question 6

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As of 2014, ______________has the largest banking assets in the world.

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		JP Morgan Chase
		Citibank
		HSBC
		Wells Fargo
		Bank of America

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1 points   

Question 7

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When corporate issuers sell an entire issue to one or more institutional buyers, such as insurance companies without registering the issue for public sale, this is entitled as _________.

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		IPO
		Underwriting
		Public Tender
		Private Placement
		Auction

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1 points   

Question 8

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One of the primary goals of the ECB is to make sure that Euro is a highly valuable currency. ECB openly intervenes in markets to manage the value of Euro as we have recently seen in global FX markets.

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		TRUE
		FALSE

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1 points   

Question 9

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Considering the balance sheet for all commercial banks in the U.S., the largest category of liabilities is:

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		Borrowing from other banks in the U.S.
		Savings deposits and time deposits
		Federal fund purchase repurchase agreements
		Borrowings from non-banks in the U.S.

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1 points   

Question 10

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__________________ are bank loans that are issued beyond the control of the local regulators.

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		Term Loans
		Revolving Credits
		Syndicated Loans
		Euro-credits
		Credit Default Swaps

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1 points   

Question 11

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In a committed facility, lender guarantees the funds intended to be raised by the borrower whereas in an uncommitted facility, lender does its best to raise the intended amount.

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		TRUE
		FALSE

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1 points   

Question 12

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FOMC increases the money supply in the economy by

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		Buying US dollars
		Selling US Treasuries to the banking system
		Buying US Treasuries from the banking system
		Magic

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1 points   

Question 13

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The letter of credit is designed to

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		allow the buyer to obtain title to the goods before they are received.
		free the seller from concerns over the payment abilities of the buyer.
		free the seller from any merchandise guarantees.
		is issued by the bank at the request of an exporter.

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1 points   

Question 14

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The difference between traditional corporate finance (CF) and Project Finance (PF) is in the source of payment. In Corporate Finance, the primary source of repayment for investors and creditors is the sponsoring (borrowing) company, backed by its entire balance sheet, whereas in the PF the project alone is the primary source of payment.

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		True
		False

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1 points   

Question 15

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Which one of the following is NOT CORRECT about European Central Bank?

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		The ECB is composed of 19 Eurozone National Central Banks that participate in the monetary union
		ECB structure mirrors the structure of the Federal Reserve System in several ways. For instance there is a six-member Executive Board of the ECB, similar to the Board of Governors and The National Central Banks play many of the same roles as the Federal Reserve Banks; and The Governing Council formulates monetary policy as the FOMC does.
		ECB is located in Frankfurt, Germany.
		The ECB Chairman is always a German as Europeans trust the tradition of German Central Banking.

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1 points   

Question 16

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A repurchase agreement is:

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		An asset that represents the value of all collateral repossessed by the bank and held for sale
		A long-term collateralized loan
		An agreement where the parties agree to reverse the transaction on a specific day
		Only made between two or more banks

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1 points   

Question 17

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_______________is similar to commercial paper issued in domestic markets with maturities of 1,3, and 6 months. They are like their CPs allow firms to raise short term funding to finance their working capital needs, but they are issued in unregulated markets.

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		Note Issuance Facility
		Bankers’ Acceptance
		Letters of Credit
		Euro Commercial Paper

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1 points   

Question 18

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The specific goals of central banks include each of the following, except:

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		High and stable real growth
		Low and stable inflation
		High levels of exports
		Low and stable unemployment

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1 points   

Question 19

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An external control enforced by bank supervisors on credit creation by banks is called required _______.

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		Asset Ratio
		Capital Ratio
		Quick Ratio
		Current Ratio
		Debt Equity Ratio

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1 points   

Question 20

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The interest rate at which banks lend each other in London is known as:

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		The international federal funds rate
		The London Interbank Offered Rate
		The discount rate
		The International Prime Rate

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1 points   

Question 21

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Which one of the following is NOT among the key retail banking issues?

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		Capital strength
		Liquidity
		Risk management
		Executive pay
		Corruption and government interference in their business

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1 points   

Question 22

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From a banking regulator’s perspective the best capital is _____________.

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		Basel III Capital
		Tier 1 Capital
		Tier 2 Capital
		Dodd Frank Capital
		Your mother’s capital

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1 points   

Question 23

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Which one of the following is not part of Bank Assets

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		Cash
		Balances at the central bank
		Money at call and short notice
		Bank and trade bills of exchange
		Shareholder’s Funds

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1 points   

Question 24

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Which of the following correctly portrays a bank’s balance sheet?

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		Total Bank Liabilities = Total Bank Capital + Total Bank Assets
		Total Bank Assets = Total Bank Capital – Total Bank Liabilities
		Total Bank Assets = Total Bank Liabilities – Total Bank Capital
		Total Bank Assets = Total Bank Liabilities + Total Bank Capital

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1 points   

Question 25

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Brokerage, Insurance, Security Custody and Foreign Exchange Trading are not typical Retail Bank services, but as banks started to offer a wide range of services under one roof, these services are also offered by large retail commercial banks.

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		TRUE
		FALSE

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1 points   

Question 26

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Commercial banking is a highly competitive industry. A large number of banks account for a tiny fraction of the industry assets. US is an exception in the global banking as US is the only country where top 10 banks in the US account for more than half of the bank assets.

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		TRUE
		FALSE

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1 points   

Question 27

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Suppose that a bank initially has a leverage ratio of 8 to 1. If this bank increases its capital by $1million and its assets by $10 million, then the bank’s:

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		Risk increases and its leverage decreases
		Liabilities decrease and its leverage increases
		Leverage decreases and its liabilities increase
		Leverage and risk increases

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1 points   

Question 28

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The realization that independent central banks delivered lower inflation and more stable economies forced politicians to let control of central banks and supported the trend towards independent central banking.

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		TRUE
		FALSE

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1 points   

Question 29

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Basel II requires banks to calculate capital ratios based on the riskiness of their assets. Banks are required to calculate their risk adjusted assets and commit at least 4% of risk adjusted assets as their Tier-1 capital which is composed of shareholder’s equity, retained earnings and non-cumulative preferred shares.

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		TRUE
		FALSE

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1 points   

Question 30

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FedWire, CHIPS, SIT, CHAPS, TIPANET are _______________ .

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		Securities Exchanges
		State Owned Banks
		Credit Unions
		Derivatives Exchanges
		Clearing Systems

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1 points   

Question 31

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A typical investment bank has _______________reverse repo and trading in its asset side of the balance sheet than a typical commercial bank.

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		A much Larger
		A much Smaller
		About the same
		Reverse repo and trading has nothing to do with the type of banking

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1 points   

Question 32

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___________ is defined as the providing of long-term equity and debt finance for corporations and governments, largely through the issuance of new securities.

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		M&A Advisory
		Corporate Banking
		IPO
		Underwriting
		Overdraft

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1 points   

Question 33

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There are 12 district reserve banks in the US. One of them, NY Fed has some specific responsibilities that other district banks do not. Which one of the following is not an exclusive task handled by New York Fed?

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		Treasury Securities Auctions
		Operating FedWire
		Execution of Monetary Policy Operations
		Foreign Currency Interventions
		Regional Economic Analysis and Assessment

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1 points   

Question 34

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Which of the following is a bank liability?

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		Mortgage loans
		Demand deposits
		Reserves
		U.S. Treasury securities

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1 points   

Question 35

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Total Equity Capital of the US Banking system is closest to _______.

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		$1.5 tr
		$5.5 tr
		$10.5 tr
		$15.5 tr
		$40.5 tr

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1 points   

Question 36

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In ________________ bank itself acts a principal and bets on market developments.

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		Pure Arbitrage
		Program Trading
		Wealth Management
		Proprietary Trading
		Brokerage

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1 points   

Question 37

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Which one of the following is not among the Central Bank Functions?

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		Supervision of the banking system
		Issuing banknotes
		Acting as banker to the other banks
		Acting as banker to the government
		Raising money for the municipalities

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1 points   

Question 38

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Which one of the following is not true about Project Finance?

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		Project finance is a funding mechanism tailored to meet the needs of a specific project. Repayment of the financing relies on the cash flow and the assets of the project itself.
		The risks (and returns) are borne not by the sponsor alone, but by different classes of investors (equity holders, debt providers, quasi-equity investors).
		Project Finance offers a means for investors, creditors, and other unrelated parties to come together to share the costs, risks, and benefits of new investment in an economically efficient and fair manner.
		Despite the fact that the financing is structured around the project’s own operating cash flow and assets, often additional sponsor guarantees are required
		None of the above

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1 points   

Question 39

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___________ services focus on hedge funds, lending them funds to trade and relieving them of administrative and back-office functions, enabling them to focus on making money.

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		Wealth Management Services
		IPO
		Proprietary Trading
		Primer Brokerage

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1 points   

Question 40

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Controlling the nation’s currency reserves, preserving the value of the currency and acting as “lender of last resort” are not among the 21st century central bank functions.

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		TRUE
		FALSE

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1 points   

Question 41

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Commercial banks differ from credit unions in the following way:

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		Credit unions focus on consumer loans while commercial banks primarily make loans to businesses
		Credit unions make loans and accept deposits while commercial banks just make loans
		Commercial banks cannot make auto loans to individuals, just to businesses while credit unions can do both
		Credit unions do not have to hold reserves while commercial banks do

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1 points   

Question 42

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The Gramm-Leach-Bliley Act:

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		Repealed the Reigle-Neal Interstate Banking and Branching Efficiency Act
		Repealed the Glass-Steagall Act’s prohibition of mergers between commercial banks and insurance or securities firms
		Repealed the McFadden Act’s restriction on bank branching
		Reinforced the Glass-Steagall Act’s limitation on commercial banks’ availability to merge with insurance or securities firms by increasing the penalties for doing so

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1 points   

Question 43

•  

Eurodollars are:

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		The currency of the European Economic Union
		Euro-denominated deposits in U.S. Banks
		Dollar-denominated deposits beyond the control of US monetary authorities in unregulated markets
		Dollars that are specially printed for use abroad to minimize counterfeiting

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1 points   

Question 44

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12 member Federal Open Market Committee (FOMC) sets the interest rates to control the availability of money and credit to the economy.

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		TRUE
		FALSE

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1 points   

Question 45

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As expected, Europe and Central Asia has much more mobile banking accounts per 100,000 adults than Sub-Saharan Africa.

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		TRUE
		FALSE

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1 points   

Question 46

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Firms planning a takeover turn to investment banks for help and advice regarding price, timing, tactics and so on. Equally, the object of the takeover or target firm turns to these bankers for help in fending off the predator. The service provided by the investment banks in this context is referred to as __________________.

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		Underwriting
		Book Building
		M&A Advisory
		Greenmail
		Proprietary Trading

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1 points   

Question 47

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Which one of the following statements is NOT CORRECT?

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		Commercial banks are in the classic business of taking deposits and lending money, it includes retail banking and wholesale banking.
		In many European countries (France, Germany, Italy, Austria, the Netherlands and Spain), there are banks that do not have outside shareholders but are ‘mutually’ owned in some way. These are the savings banks and cooperative banks.
		The term clearing bank is applied to the banks most involved in the system for clearing cheques. They will be the large domestic banks who are heavily into retail banking
		Merchant bank refers to the banks owned by the state that are not central banks but carry out some public sector activity.

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1 points   

Question 48

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__________________ facilitate long term equity and debt financing for companies and governments. They provide a range of services from origination, underwriting, placement, and market making to advisory services. The largest companies in the industry perform multiple services advice corporations on mergers and acquisitions as well as advising on the restructuring of existing corporations.

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		Commercial Banks
		Giro Banks
		Postal Banks
		Investment Banks
		Retail Banks

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1 points   

Question 49

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Total Assets of the US Banking system is closest to

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		$1 tr
		$5 tr
		$10 tr
		$15 tr
		$40 tr

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1 points   

Question 50

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Which one of the following is not essential for Central Bank success?

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		Independence (isolation from political pressure)
		A strong personality in chairman’s role (eg. Alan Greenspan or former ECB chairman Jean Claude Trichet)
		Accountability to the public and transparency in communicating its policy actions
		Operating within an explicit framework that clearly states its goals and makes clear the trade-offs among them.

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