商业银行管理彼得S罗斯英文原书第8版英语试题库Chap010.doc

1、Test Bank, Chapter 10162Chapter 10The Investment Function in Banking and Financial-Services ManagementFill in the Blank Questions1. A(n) _ is a security issued by the federal government which has less than one year to maturity when it is issued. Answer: Treasury bill 2. Debt instruments issued by ci

2、ties, states and other political entities and which are exempt from federal taxes are collectively known as _ . Answer: municipal securities 3. The investment maturity strategy which calls for the bank to have one half of its investment portfolio in very short term assets and one half of its investm

3、ent portfolio in long term assets is known as the _ . Answer: barbell strategy 4. A(n) _ is a security where the interest portion of the security is sold separately from the principal portion of the security. Answer: stripped security 5. _ are the way the federal, state and local governments guarant

4、ee the safety of their deposits with banks. Answer: Pledging requirements 6. The most aggressive investment maturity strategy calls for the bank to continually shift the maturities of its securities in responses to changes in interest rates and is called the _. Answer: rate expectation strategy 7. _

5、 is the risk that the bank will have to sell part of its investment portfolio before their maturity for a capital loss. Answer: Liquidity risk 8. _ is the risk that the economy of the market area they service may take a down turn in the future. Answer: Business risk Rose/Hudgins, Bank Management and

6、 Financial Services, 8/e 1639. _ is the risk that the company whose bonds the financial institution owns may retire the entire issue of corporate bonds in advance of their maturity leaving the bank with the risk of earnings losses resulting from reinvesting the cash at lower interest rates. Answer:

7、Call risk 10. A security issued by the federal government with 1 to 10 years to maturity when it is issued is called a(n) _ . Answer: Treasury note 11. A short term debt security issued by major corporations is known as _. Answer: commercial paper 12. The investment maturity strategy which calls for

8、 the bank to have all of their investment assets in very short term maturities is called the _. Answer: front-end-loaded policy 13. A money market security which represents a banks commitment to pay a stipulated amount of money on a specific future date under specific conditions and which is often u

9、sed in international trade is known as a(n) _. Answer: bankers acceptance 14. A(n) _ is an interest-bearing receipt for the deposit of funds in a bank for a stipulated time period. Ones that are oriented towards business customers or institutions are known as jumbos. Answer: certificate of deposit 1

10、5. _ are any securities which reach maturity in under one year. Answer: Money market securities 16. _ are any securities whose original maturity exceeds one year. Answer: Capital market securities 17. Securities sold by Fannie Mae, Freddie Mac and others are known as _. Answer: federal agency securi

11、ties 18. Claims against the expected income and principal generated by a pool of similar-type loans are known as _. Answer: securitized assets Test Bank, Chapter 1016419. The long term debt obligations of major corporations are known as _. Answer: corporate bonds 20. The investment maturity strategy

12、 which calls for the bank to have all of their investment assets in very long term maturities is known as the _. Answer: back-end-loaded policy 21. Financial Institutions may invest in municipal bonds issued by smaller local governments. These bonds are known as _ bonds. Answer: bank qualified 22. M

13、arketable notes and bonds sold by agencies owned by the government or sponsored by the government are known as .Answer: government agency securities23. A security issued by the federal government with greater than 10 years to maturity when it is issued is called a(n) .Answer: Treasury Bond24. are ti

14、me deposits of fixed maturity issued by the worlds larges banks headquartered in financial centers around the globe. The heart of this market is centered in London.Answer: Eurocurrency deposits25. are a type of municipal bond that are backed by the full faith and credit of the issuing government.Ans

15、wer: General obligation bonds26. are a type of municipal bond that are paid only from certain stipulated source of funds.Answer: Revenue bonds27. are closely related to CMOs and partition the cash flow from a pool of mortgage loans or mortgage backed securities into multiple maturity classes in orde

16、r to reduce the cash-flow uncertainty of investors.Answer: Real Estate Mortgage Investment Conduits (REMICs)28. is the risk that loans will be terminated or paid off ahead of schedule. This is a particular problem with residential home mortgages and other consumer loans that are pooled and used as c

17、ollateral in securitized assets.Answer: Prepayment riskRose/Hudgins, Bank Management and Financial Services, 8/e 16529. A lending institution that sells lower-yielding securities at a loss in order to reduce current taxable income while simultaneously purchasing higher-yielding new securities in ord

18、er to boost future returns is doing a(n) .Answer: tax swap30. A(n) is a picture of how market interest rates differ across loans securities of varying times to maturity.Answer: yield curveTrue/False QuestionsT F 31. Investments in securities provide diversification for a banks assets because most lo

19、ans come from the local areas served by a banks offices. Answer: True T F 32. Bank income from loans is fully taxable. Answer: True T F 33. Investment securities are expected to “dress up“ a banks balance sheet, according to the textbook. Answer: True T F 34. Investment securities are expected to he

20、lp stabilize a financial institutionss income. Answer: True T F 35. A short-term IOU offered by major corporations that is of short maturity (most of these lOUs mature in 90 days or less) is known as a CMO. Answer: False T F 36. Prepayment risk on securitized assets generally increases when interest

21、 rates rise. Answer: False T F 37. Stripping a security eliminates prepayment risk. Answer: False T F 38. According to the textbook the dominant security held in U.S. bank investment portfolios is state and local government bonds. Answer: False Test Bank, Chapter 10166T F 39. Interest income and cap

22、ital gains from a banks portfolio of investment securities is taxed in the United States as ordinary income.Answer: True T F 40. Eurocurrency deposits that some banks purchase as investments generally carry higher market yields than domestic time deposits issued by comparable-size U.S. banks. Answer

23、: True T F 41. Bankers acceptances are considered to be among the safest of all money market instruments. Answer: True T F 42. An eligible acceptance is one that can be used as collateral for borrowing from a Federal Reserve bank. Answer: True T F 43. When a bank irrevocably guarantees a commercial

24、paper issue, the banks credit rating substitutes for the borrowers credit rating. Answer: True T F 44. The principal risk banks face from investing in structured notes is credit (default) risk. Answer: False T F 45. The principal risk to a financial institution buying CMOs is market risk. Answer: Fa

25、lse T F 46. Stripped mortgage-backed securities fully protect investors from having to reinvest their income at lower and lower interest rates. Answer: False T F 47. Stripped mortgage-backed securities make maturity matching of bank assets and liabilities easier to accomplish than do most other inve

26、stment securities that banks buy. Answer: False T F 48. Lower interest rates increase the present value of all projected cash flows from a loan-backed security so that its market value could rise. Answer: True Rose/Hudgins, Bank Management and Financial Services, 8/e 167T F 49. Treasury bills are th

27、e long term debt obligations issued by the federal government. Answer: False T F 50. Commercial paper is the short term debt instrument issued by major banks. Answer: False T F 51. Treasury notes and bonds are issued by the federal government and are coupon instruments. Answer: True T F 52. Interest

28、 rate risk is the risk financial institutions face due to changes in market interest rates. Answer: True T F 53. One investment maturity strategy popular among smaller institutions is the ladder or spaced maturity policy. It is popular because it does not take much expertise to implement. Answer: Tr

29、ue T F 54. One investment maturity strategy, called the front end loaded policy, requires that the bank put all of its investment portfolio in long term securities. Answer: False T F 55. Business risk is the risk that the bank will experience a cash shortage and will have to sell some of its investm

30、ents securities. Answer: False T F 56. Inflation risk is the possibility that the purchasing power of interest income and repaid principal from a security or loan will be eroded by rising prices for goods and services.Answer: TrueT F 57. Call risk refers to the right of debt collectors to call in th

31、e loans in advance of maturity and get an early repayment. Answer: False T F 58. If interest rates fall, a callable bond at par has the potential for large increases in price.Answer: FalseT F 59. The yield to maturity is the discount rate that equates a securitys purchase price with the stream of in

32、come expected until it is sold to another investor. Answer: FalseTest Bank, Chapter 10168Multiple Choice Questions60. An important investment security popular with banks that must by law mature within one year from the date of issue and which has a high degree of safety and marketability is the: A)

33、Treasury bill B) Treasury note C) FNMA note D) Bankers acceptance E) Eurodollar CD Answer: A 61. A banks promise to pay the holder a designated amount of money on a designated future date and is often used in international trade is known as a (or an): A) Promissory guarantee B) Discount security C)

34、Bankers acceptance D) In the money option E) Accretion note Answer: C 62. Pools of mortgages put together either by a government agency or by a private investment banking corporation to raise more loanable funds for the issuer are known as a (or an): A) Accretion bond B) Participation certificate C)

35、 CMO D) Stripped security E) Commercial paper Answer: C 63. Fluctuations in the timing of cash payments flowing from an underlying pool of securitized assets is referred to as: A) Income risk B) Prepayment risk C) Liquidity risk D) Capital risk E) None of the above Answer: B 64. Principal roles that

36、 a financial institutions investment portfolio play include which of the following? A) Income stability B) Geographic diversification C) Hedging interest rate risk Rose/Hudgins, Bank Management and Financial Services, 8/e 169D) Backup liquidity E) All of the above Answer: E 65. _ is the method by wh

37、ich banks can provide a safeguard for the deposits of governmental units. A) Hedging B) Collateralization C) Pledging D) Securitization E) Window dressing Answer: C 66. The most aggressive investment maturity strategy that calls for the bank to continually shift the maturities of its securities in r

38、esponse to changes in interest rates and other economic conditions is the A) Barbell strategy B) Rate expectations approach C) Front-end-loaded policy D) Ladder approach E) None of the above Answer: B 67. Which of the following statements is (are) correct regarding duration? A) In comparing two bond

39、s with the same yield to maturity and the same maturity, a bond with a higher coupon rate will have a longer duration. B) In comparing two loans with the same maturity and the same interest rate, a fully amortized loan will have a shorter duration than a loan with a balloon payment. C) The duration

40、will always be shorter than the maturity for all debt instruments. D) All of the above E) B and C Answer: B 68. Which of the following is not one of the Capital Market instruments in which banks invest? A) U.S. Treasury notes B) Corporate notes and bonds C) U.S. Treasury bonds D) Municipal bonds E)

41、Commercial paper Answer: E 69. Which of the following is true of Treasury bills?A) Interest on Treasury bills is exempt from state income taxes.B) Interest on Treasury bills is exempt from federal income taxes.C) Treasury bills pay a lower pretax yield than comparable corporate securities.D) All of

42、the above are true.Test Bank, Chapter 10170E) A and C onlyAnswer: E70. In recent years security dealers have assembled pools of federal agency securities whose principal interest yield may be periodically reset based on what happens to a stated interest rate or may carry multiple coupon rates that a

43、re periodically adjusted; the foregoing describes a: A) Financial futures contract B) Revenue-anticipation note C) Zero coupon instrument D) Structured note E) None of the above Answer: D 71. Banks are generally not allowed to invest in speculative grade bonds. What kind of risk is this designed to

44、limit? A) Liquidity risk B) Business risk C) Credit risk D) Tax exposure E) Interest rate risk Answer: C 72. A security where the interest payments and the principal payments are sold separately is called: A) A Treasury note B) An accretion C) A structured note D) A stripped security E) None of the

45、above Answer: D 73. Which of the following is true? Mortgage prepayment risk: A) Is higher on high interest rate mortgages B) Is felt most dramatically when interest rates rise C) Is eliminated by the use of mortgage backed securities D) Is eliminated by the purchase of a stripped mortgage obligatio

46、n E) All of the above are true Answer: A 74. A bank replaces 5-year corporate bonds with a yield to maturity of 9.75 percent with 5-year municipal bonds with a yield to maturity of 7 percent. This bank is in the 35 percent tax bracket and these bonds have the same default risk. What is the most likely reason this bank changed from the corporate to the municipal bonds? A) Liquidi