Model 5 fi

Answer the following questions: Question (1): Multiple-Choice Questions

.Asymmetric information problems occur in two forms-1

A information costs and bargaining costs
b adverse selection and moral hazard
c systematic risk and unsystematic risk
D monetary costs and opportunity costs

Surplus spending units (SSUs) are also called-2

A lenders
b borrowers
c sellers of securities
D balanced budget units

The Functions of the financial system include -3

A Facilitating the flow of fund
b Providing ways of dealing with the incentive problems that arise in financial
contracting
c Generating and disseminating information that assist decision making
D All of the above

?Which of the following are NOT financial claims -4

A Bonds
b Shares
c Loans
D Commodities

The flow of funds from saving to investment through direct financing involve -5
A the saver holding the lender's IOU
b two separate contracts
c the lender holding the borrower's IOU
D several different financial institutions

:The risk that the borrower doesn't repay that the principal or the interest is called -6
A Operational risk
b Liquidity risk
c political risk
D Credit risk

The main provider(s) of funds to the U.S. Treasury is (are) -7

A households and businesses
b foreign financial institutions
c the Federal Reserve System
D foreign nonfinancial sectors

Funds are provided to the initial issuer of securities in the -8

A secondary market
b primary market
c deficit market
 D surplus market
Without the participation of financial intermediaries in financial market transactions -9
A information and transaction costs would be lower
b transaction costs would be higher but information costs would be unchanged .
c information costs would be higher but transaction costs would be unchanged
D information and transaction costs would be higher

Which of the following distinguishes credit unions from commercial banks and savings -10
?institutions
A Credit unions are non-profit
b Credit unions accept deposits but do not make a loans
c Credit unions make loans but do not accept deposit
D Savings institutions restrict their business to member who shares a common bond

securities have one year or less; ……. Securities are generally more liquid ..…… -11
A Money market ;capital market
b Money market ; Money market
c capital market; Money market
D capital market; capital market

:The largest source of income at a typical bank is-12

A interest income on securities held for sale
b interest income on loans and lenses
c interest income on securities held for investment
D noninterest income
.
?Which of the following are not considered depository financial institutions -13
A esa finance compani
b Commercial banks
c Saving institutions
D Credit union

All but which one of the following is an example of noninterest income or -14
?noninterest expense
A Income from service charges on deposits
b Account assets gain and losses from trading
c Income from trust services
D Earning on securities held for investment

When a securities firm acts as a broker, it -15

A guarantees the issuer a specific price for newly issued securities
b Makes a market in specific securities by adjusting its own inventory
c Executes transactions between two parties
D Purchases securities for its own account

If the value of net income is 115, interest income on loans is $450, interest income on -16
:securities $95, interest expense $246, non-interest income is $78, the bank's profit margin is
A 27.27%
b 23.08%
c 21.31%
D 18.46%
banks A has a higher ROA than bank B. both banks have similar interest income to assets -17
ratios and noninterest income to assets ratios. We know that
I Bank A has a higher profit margin than Bank B
II Bank A has a higher AU ratio than B
III Bank A must have a higher PLL/OI ratio
A I only
b II only
c I and II only
D III only

The lower the interest expense ratio , the provision for loan loss ratio, the noninterest -18
..………expense ratio, and the tax ratio the ………..the
A Lower;PM
b Lower;AU
c Higher;PM
D Higher;AU

:In comparison to small bank , larger banks typically have-19

A More equity capital
b More core deposits
c More off balance sheet activities
D All of the above

the first bank of the Ozarks generates $0.0155 dollars of net income per dollar of assets -20
and it has a profit margin of 12.25 percent . how much operating income per dollar of total
?assets does first bank generate
A percent 12.50
b percent 12.75
c percent 12.65
D percent 12.85

investment securities plus ………is equal to a bank's earning asets -21

A Net loans and leases
b Property ,plant, and equipment
c Gross loans and leases
D Securities held for trading

assuming the gross amount of the loans at the end of period is 350000, the value of -22
allowance for loan losses is 150000 the balance net loans
A 200000
b 102000
c 250000
D 142000

investment firms that pool money from individuals and/or institutions and invest equity -23
funds in start-up firms are called
A Top-tier bankers
b ECNs
c Section 20 affiliates
 D Venture capital firms
an unregistered issue sold to a few large intuitional buyers is an example of a (n) -24
A Best efforts offering
b Shelf offering
c Fully underwritten public offering
D Private placement

?which of the following securities firm's activities is normally the most risky -25
A Best efforts offering
b Pure arbitrage
c Private placement
D Firm commitment offering

which of the following statement is NOT correct? Financial claims that take the form of -26
:debt are
A IOUs
b Written promises to pay a specific sum of money (the principal) and the interest
c Issued by borrowers and purchased by providers of fund
D Equity for recipients of funds and assets for providers of fund

27- Diversified full-line securities firms engage in all but which one of the following?
A Trading and brokerage of existing securities
b issuing new securities
c Corporate restructuring and advice
D raising money via insured deposits

28- you buy euros in New York from Deutsche Bank and simultaneously sell them in Loan
Barclays for a gain. This is an example of
A position trading
b Program trading
c Risk arbitrage
D Pure arbitrage

29- ‫ـــــــــــــ‬are examples of investment bankers offering traditional commercial banking

services.
A Online brokers
b venture capital funds
c Cash management accounts
D merger and acquisition services

30- The Egyptian National Bank submitted its balance sheet and income statement to the
general assembly at the end of the Year as follows:
Balance Sheet Liabilities and Owner's Equity
Assets Demand deposits 11300
Cash and deposits due from banks ? Saving deposits and NOW accounts ?
Investment securities, available for sale 8200 Money market deposit accounts 4600
Trading securities 1200 Time deposits 22300
Reserve fund sold 2000 Deposits due to foreign branches 2500
Loans (gross) ? Total deposits 44300
Allowance for loan losses (1500) Non deposit borrowings 3800
Unearned discount on loans (600) Other liabilities 2900
Loans (net) 35200 Stockholders' Equity ?
Plant and Equipment 900 Total liabilities and Owner's Equity 56000
Customer's liability on acceptances 1800
Miscellaneous assets 4400
Total Assets 56000

Income Statement
Interest and fees on loans ? Services charges on customer deposits2 ?
Interest in Inv. Securities 3700 Trust department income 1800
Other interest income 3500 Other operating income 2000
Total interest income 28000 Total noninterest income 6900
Total interest expense 18900 Wages, salaries. and benefits ?
Net interest income ? Net occupancy and equipment expenses 700
Provision for loan losses 400 Other expenses 500
Total noninterest expenses 5400
Net noninterest income ?
Income taxes 200
Net income (loss) after taxes ?
According to the previous information the value of Cash and deposits due from banks is:

A 2300
b 3200
c 3000
D 2500

31- The value of Gross loans:

A 38000
b 37300
c 35200
D 34800

32-The value of Saving deposits and now accounts

A 3200
b 3000
c 6300
D 3600

33- The value of stockholder's equity is

A 5000
b 6000
c 2000
D 8000

34- The value of Interest and fees on loans:

A 20800
b 28000
c 10000
D 11200
35- The value of Net interest income:
A 9500
b 3200
c 9300
D 9100

36-The value of wages, salaries and benefits:

A 4200
b 3000
c 2500
D 3200

37- the value of Net noninterest income is:

A 1500
b 3500
c 2500
D 4500

38- The value of Services charges on customer's deposits:

A 3000
b 3100
c 4200
D 9700

39- The value of Net income:

A 10000
b 20000
c 9000
D 5000

40-the value of return on assets ratio is:

A 15.85%
b 17.86%
c 12.08%
D 10.55%

41-The value of debt to asset ratio is:

A 91.07%
b 55.74%
c 44088%
D 66.08%

Question (2): True or False:

42- Money market securities are commonly issued in order to finance the purchase of
assets such as buildings, equipment, or machinery.
43. Common types of capital market securities include Treasury bills and commercial
paper.
44-Derivative transactions are considered off the balance sheet activities for
commercial banks
45-Diseconomies of scale refer to the degree to which a firm's average unit costs of
producing financial services fall as its output of services increase.
46-IOUs are financial claims against someone else's money at a future date
47-A payment system is a system that permits the settlement of commercial and
financial transactions
48-Commercial banks’ lending to businesses is a form of indirect finance.
49-Loans comprise the single largest asset category for a bank.
50-Non transaction deposits at banks include NOW accounts and demand deposits. F
51-On average, bank liabilities tend to have shorter maturities and greater liquidity
than bank assets
52-For securities firms, income from investment management is more stable than
income from underwriting or trading activities.
Securities firm and investment banks act as retail customers by assisting in the -53
issue of new securities, or primary market transactions
54- Public offerings are securities issued to pre-selected investors and institutions in
the open market
55-Private equity and VC have the same funds sources and types of investments
If you buy 100 shares of IBM stock in anticipation that earnings will increase by -56
more than anticipated you are engaging in what is termed a risky arbitrage
ROA measures the ability to pay expenses and generate net income from interest -57
and noninterest income
58- PM measures the amount of interest and noninterest income generated per
dollar of total assets
59- The net interest margin (NIM) measures the net return on a bank's earning assets.
60- The cost of transferring funds by the securities firms from suppliers to net users of
funds is low.