Question 1

The Herfindahl index is a measure of banking innovation.

Accepted Answer

A) True 
 B)False

Question 2

Bank consolidation is desirable because

Accepted Answer

A)   small banks with little capital are eliminated.
B)   banks are more diversified.
C)   both of the above.
D)   neither of the above.E) B) and D)
F) A) and C)

Question 3

Junk bonds are an example of a securitized asset.

Accepted Answer

A) True 
 B)False

Question 4

Government regulation is relatively permissive in the United States compared to other countries.

Accepted Answer

A) True 
 B)False

Question 5

According to the Herfindahl index, the U.S banking industry is _____ concentrated than that of most developed economies.

Accepted Answer

A)   more
B)   less
C)   equally
D)   The Herfindal index is not a measure of concentration.E) A) and B)
F) None of the above B

Question 6

The biggest reason for the consolidation of the banking industry in the 1980s was

Accepted Answer

A)   mergers.
B)   bankruptcy.
C)   bailouts.
D)   all of the above.E) B) and C)
F) A) and B)

Question 7

ATMs have reduced a bank's expenses.

Accepted Answer

A) True 
 B)False

Question 8

Mortgage backed assets are an example of a securitized asset.

Accepted Answer

A) True 
 B)False

Question 9

According to the Herfindahl index, the U.S. banking industry has become increasingly concentrated in the last few decades.

Accepted Answer

A) True 
 B)False  True

Question 10

Bank consolidation is potentially a problem because

Accepted Answer

A)   larger banks are harder to regulate.
B)   banks are less diversified.
C)   banks are less able to innovate.
D)   all of the above.E) A) and D)
F) A) and C)

Question 11

The Great Inflation affected the banking industry through the following channels.

Accepted Answer

A)   lower nominal interest rates
B)   decline in deposits
C)   decreased competition among banks
D)   all of the aboveE) None of the above
F) A) and B) B

Question 12

Securitization has allowed some banks to concentrate on

Accepted Answer

A)   origination of loans.
B)   credit risk.
C)   specialized lending.
D)   all of the above.E) B) and C)
F) C) and D)

Question 13

Commercial banks are the only institutions in the United States that take transactions deposits.

Accepted Answer

A) True 
 B)False

Question 14

What is a unit bank?

Accepted Answer

A unit ban...

Question 15

Why would larger banks be less risky?

Accepted Answer

Large banks can have...

Question 16

Regulation Q (the restriction on interest paid on deposits) was responsible for the rise in nominal interest rates in the 1970s.

Accepted Answer

A) True 
 B)False

Question 17

ARMs

Accepted Answer

A)   force borrowers to assume interest rate risk.
B)   became more prevalent during the Great Inflation.
C)   both of the above.
D)   neither of the above.E) All of the above
F) None of the above

Question 18

A small bank in a rural community proposes to merge with a large national bank. Give one reason customers of the small bank might object to the proposal. Give a reason they might be in favor.

Accepted Answer

Customers might object to the merger sin...

Question 19

Bank holding companies allows bankers to circumvent

Accepted Answer

A)   Regulation Q.
B)   interstate banking restrictions.
C)   reserve requirements.
D)   none of the above.E) All of the above
F) C) and D)

Question 20

The erosion of Glass-Steagall allowed financial institutions to take advantage of

Accepted Answer

A)   economies of scale.
B)   economies of scope.
C)   interstate banking.
D)   all of the above.E) None of the above
F) C) and D)

Exam 10: Innovation and Structure in Banking and Finance

The Herfindahl index is a measure of banking innovation.

Correct AnswerverifiedShow Answer

Bank consolidation is desirable because

Correct AnswerverifiedShow Answer

Junk bonds are an example of a securitized asset.

Correct AnswerverifiedShow Answer

Government regulation is relatively permissive in the United States compared to other countries.

Correct AnswerverifiedShow Answer

According to the Herfindahl index, the U.S banking industry is _____ concentrated than that of most developed economies.

Correct AnswerverifiedB

The biggest reason for the consolidation of the banking industry in the 1980s was

Correct AnswerverifiedShow Answer

ATMs have reduced a bank's expenses.

Correct AnswerverifiedShow Answer

Mortgage backed assets are an example of a securitized asset.

Correct AnswerverifiedShow Answer

According to the Herfindahl index, the U.S. banking industry has become increasingly concentrated in the last few decades.

Correct AnswerverifiedTrue

Bank consolidation is potentially a problem because

Correct AnswerverifiedShow Answer

The Great Inflation affected the banking industry through the following channels.

Correct AnswerverifiedB

Securitization has allowed some banks to concentrate on

Correct AnswerverifiedShow Answer

Commercial banks are the only institutions in the United States that take transactions deposits.

Correct AnswerverifiedShow Answer

What is a unit bank?

Correct AnswerverifiedA unit ban...View AnswerShow Answer

Why would larger banks be less risky?

Correct AnswerverifiedLarge banks can have...View AnswerShow Answer

Regulation Q (the restriction on interest paid on deposits) was responsible for the rise in nominal interest rates in the 1970s.

Correct AnswerverifiedShow Answer

ARMs

Correct AnswerverifiedShow Answer

A small bank in a rural community proposes to merge with a large national bank. Give one reason customers of the small bank might object to the proposal. Give a reason they might be in favor.

Correct AnswerverifiedCustomers might object to the merger sin...View AnswerShow Answer

Bank holding companies allows bankers to circumvent

Correct AnswerverifiedShow Answer

The erosion of Glass-Steagall allowed financial institutions to take advantage of

Correct AnswerverifiedShow Answer

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B

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True

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B

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A unit ban...
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Large banks can have...
View Answer

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Customers might object to the merger sin...
View Answer

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