When a $10 cheque written on the First National Bank is deposited in an account at CIBC, then ________.

the liabilities of CIBC increase by $10

A $5 million deposit outflow from a bank has the immediate effect of ________.

) reducing deposits and reserves by $5 million

Banks have attempted to maintain adequate profit levels by ________.

pursuing new off-balance-sheet activities

The difference between a Schedule II and a Schedule III bank is that ________.

a Schedule II bank is a Canadian subsidiary of a foreign bank

The goals of bank asset management include ________.

purchasing securities with high returns and low risk

The three players in the money supply process include ________.

banks, depositors, and the central bank

Bank capital is equal to ________ minus ________.

total assets; total liabilities

The difference between a Schedule II and a Schedule III bank is that ________.

a Schedule II bank is a Canadian subsidiary of a foreign bank

-----are the 4 -pillars of in the financial market

banking, brokerage, trusts, and insurance

A bank is insolvent when ________.

its liabilities exceed its assets

Identify the correct statement

A bank's B Sheet shows that total assets = total liabilities plus capital

If CDIC employs the "payoff method, it

guarantees a great portion of deposits will be returned to depositors

trust and mortgage loan companies, and credit unions and caisses populaires

Bank capital is equal to ________ minus ________.

total assets; total liabilities

An characteristic of credit unions includes

they are organized for individuals with a common bond and member based

The owner of a call option has ________.

the right to buy the underlying security

Banks have attempted to maintain adequate profit levels by ________.

pursuing new off-balance-sheet activities

Which of the following statements is false?

Bank capital is recorded as an asset on the bank balance sheet.

If CDIC employs the "purchase and assumption it

guarantees all deposits to depositors

If you’re the seller of a call option then you have ________.

the obligation to sell the underlying securit

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INTL 702 Review Final Exam

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Questions 40

Answers

1
When a $10 cheque written on the First National Bank is deposited in an account at CIBC, then ________.
the liabilities of CIBC increase by $10
the assets of CIBC fall by $10
the reserves of the First National Bank increase by $ 10
the liabilities of the First National Bank increase by $10
2
The three types of finance companies are
sales, consumer, and business
credit, consumer, and bank
sales, investment, and business
credit, consumer, and business
3
a Canadian MNC wants to hedge receivables in euros, and is certain that the euro will depreciate, then the CFO should
purchase euro currency call options
remain unhedged
sell euros forward.
purchase euro currency put options.
4
A bank manager might need to increase the bank's capital to assist capital, the manager can ________.
buy back bank stock
sell securities the bank owns and put the funds into the reserve account
pay higher dividends
sell bank stock
5
Identify the instrument which is least effective when hedging long-term exposures
money market hedge
parallel loan
long-term forward contract
currency swap
6
A $5 million deposit outflow from a bank has the immediate effect of ________.
reducing deposits and capital by $5 million
reducing deposits and loans by $5 million
) reducing deposits and reserves by $5 million
reducing deposits and securities by $5 million
7
Banks have attempted to maintain adequate profit levels by ________.
decreasing capital accounts
increasing reserve deposits at the Bank of Canada
making fewer riskier loans, such as commercial real estate loans
pursuing new off-balance-sheet activities
8
When banks offer borrowers smaller loans than they have requested, banks are said to ________.
rediscount the loan
shave credit
ration credit
raze credit
9
The monetary liabilities of the Bank of Canada include ________.
government securities and advances to banks
notes in circulation and advances to banks
government securities and reserves
notes in circulation
10
The difference between a Schedule II and a Schedule III bank is that ________.
a Schedule II bank is a Canadian subsidiary of a foreign bank
foreign bank enter the Canadian banking industry only as a Sched III bank
widely held foreign banks can own 50 percent of a Canadian bank subsidiary
Sched. III bank is a foreign bank not allowed to branch directly in Canada
11
The goals of bank asset management include ________.
lending at high interest rates regardless of risk
maximizing risk
minimizing liquidity
purchasing securities with high returns and low risk
12
The three players in the money supply process include ________.
banks, depositors, and borrowers
banks, depositors, and the central bank
banks, borrowers, and the central bank
banks, depositors, and the Department of Finance
13
Bank capital is equal to ________ minus ________.
total liabilities; total borrowings
total assets; total reserves
total assets; total liabilities
total liabilities; total assets
14
The difference between a Schedule II and a Schedule III bank is that ________.
a Schedule III bank is a foreign bank with no direct into Canada
a Schedule II bank is a Canadian subsidiary of a foreign bank
a foreign bank can only be a Schedule III bank
widely held foreign banks can own 50 percent of a Canadian bank subsidiary
15
If a bank needs to raise the amount of capital relative to assets, a bank manager might choose to ________.
pay higher dividends
) sell bank stock
buy back bank stock
sell securities the bank owns and put the funds into the reserve account
16
-----are the 4 -pillars of in the financial market
banking, brokerage, trusts, and insurance
banking, brokerage, credit unions, and mutual funds
banking, brokerage, trusts, and mutual funds
banking, brokerage, credit unions, and insurance
17
When the Bank of Canada sells $100 worth of bonds to First National Bank, reserves in the banking system ________.
decrease by more than $100
increase by more than $100
decrease by $100
increase by $100
18
When the Bank extends a $100 loan to the First National Bank, reserves in the banking system ________.
decrease by $100
increase by $100
decrease by more than $100
increase by more than $100
19
The monetary base declines when ________.
) the Bank extends advances to banks
the Bank sells securities
float increases
deposits at the Bank decrease
20
A bank is insolvent when ________.
assets increase in value
its capital exceeds its liabilities
its assets exceed its liabilities
its liabilities exceed its assets
21
When the Bank of Canada buys $100 worth of bonds from First National Bank, reserves in the banking system ________.
increase by $100
decrease by $100
decrease by more than $100
increase by more than $100
22
As a bank manager, you're facing a reserve deficiency, which would be your last option to employ?
take advancement from BOC
sell securities
call loan
borrow form other banks
23
Identify the correct statement
A bank's liabilities are its uses of funds.
A bank's balance sheet indicates whether or not the bank is profitable
A bank's B Sheet shows that total assets = total liabilities plus capital
A bank's assets are its sources of funds
24
If CDIC employs the "payoff method, it
guarantees the bank will not fail
guarantees another bank will take over the failing bank
guarantees a great portion of deposits will be returned to depositors
guarantees all deposits will be returned to depositors
25
Property promised to the lender as compensation if the borrower defaults is called _______
collateral
contingencies
restrictive covenants
deductibles
26
What propelled financial innovations by the chartered banks?
profits
recognition
requirement by the Central Bank
excellent customer service
27
Near bank includes
banks and trust and mortgage loan companies
banks, brokers, and credit unions and caisses populaires
trust and mortgage loan companies, and credit unions and caisses populaires
trust and mortgage loan companies, and brokers
28
When the Bank of Canada extends a loan to a bank, the monetary base ________ and reserves ________.
increases; remain unchangedincreases; remain unchanged
remains unchanged; decrease
increases; increase
remains unchanged; increase
29
When you deposit a $50 bill in the New National Bank, ________.
its cash items in the process of collection increase by $50
its assets increase by $50
its reserves decrease by $50
its liabilities decrease by $50
30
Bank capital is equal to ________ minus ________.
total liabilities; total assets
total liabilities; total borrowings
total assets; total liabilities
total liabilities; total assets
31
An characteristic of credit unions includes
they are organized for individuals with a common bond and member based
they are typically large
branching is prohibited
their lending is primarily for mortgage loans
32
Examples of off-balance-sheet activities include ________.
loan sales
extending loans to depositors
borrowing from other banks
selling negotiable CDs
33
The owner of a call option has ________.
the right to buy the underlying security
the obligation to sell the underlying security
the obligation to buy the underlying security
the right to sell the underlying security
34
Banks have attempted to maintain adequate profit levels by ________.
making fewer riskier loans, such as commercial real estate loans
pursuing new off-balance-sheet activities
decreasing capital accounts
increasing reserve deposits at the Bank of Canada
35
Of the following, which would be the first choice for a bank facing a reserve deficiency?
Sell securities
Call in loans
Borrow from other banks
Borrow from the Bank of Canada
36
Which of the following statements is false?
The bank's assets provide the bank with income
A bank's assets are its uses of funds.
A bank issues liabilities to acquire funds
Bank capital is recorded as an asset on the bank balance sheet.
37
If CDIC employs the "purchase and assumption it
guarantees an initial payout of $100,000
guarantees the bank will fail
guarantees some deposits depositors
guarantees all deposits to depositors
38
If you’re the seller of a call option then you have ________.
the right to buy the underlying security
the obligation to sell the underlying securit
the right to sell the underlying security
the obligation to buy the underlying security
39
----are not assets on a bank's balance sheet?
loans
demand deposits
Securities
Cash items in the process of collection
40
An insurance management tool includes
all of the above
restrictive covenant
co-insure
risk based premium

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