Bank management

Define Deficit Spending Units. (1)

2) Define Surplus Spending Units. (1)

3) The role banks play between deficit spending units and surplus-spending units is called the _______________________ Role. (1)

4) Other than the role mentioned in question #3, name two (2) other roles that Banks play in the economy. (2)

1)

2)

5) Name two (2) of the many criteria that can be used to determine if a bank is a mega-bank or a community bank. (2)

1)

2)

6) What are the only two (2) ways to finance a company? For each way, briefly describe what it means, what it costs to obtain, and how it is represented in the Capital Markets. (8)

A.

B.

7) What is SarbOx? (8)

8) Bank customers are changing. Name two (2) bank customer characteristic changes and give the impact of the change on banks. (6)

Change:

How must Banks respond:

9) Name two (2) of the principal reasons banks are subject to government regulations. (4)

Imposes Reserve Requirements on Member Bank Deposits

a) Comptroller of the Currency b) FDIC

c) Federal Reserve System

d) State Banking Commission

Reviews Bank Mergers for their effects on competition

a) Department of Justice

b) FDIC

c) Federal Reserve System

d) Federal Anti-Trust Reserve Board

Issuing a new bank’s charter

a) Comptroller of the Currency b) FDIC

c) Federal Reserve System

d) State Banking Commission

Must approve public offerings of debt and equity Securities by banks or bank holding companies

a) Comptroller of the Currency

b) Securities and Exchange Commission c) Department of Justice

d) FDIC

Insures deposits of banks conforming to its regulation

a) Federal Reserve System

b) State Banking Commission c) FDIC

d) Comptroller of the Currency

What are three (3) of the many questions that are asked what a new Bank or Branch is being sought? (3)

The Federal Law that prohibited federally supervised commercial banks from offering investment banking services on privately issued securities is known as: (2)

A. The Glass-Steagall Act

B. The Bank Merger Act

C. The Depository Institutions Deregulation and Monetary Control Act

D. The Federal Reserve Act

E. The Graham-Leach-Bliley Act

What is the three (3) part statement that Banks must display when offering Investment and/or Insurance Products and Services in the same location that it offers Depository Products and Services? (6)

A. B C.

What is Check 21, and what is its impact? (2)

What is included in a typical monthly Mortgage Payment? (4)

How are Banks and Credit Unions different? (8)

The Federal Law that allows federally supervised commercial banks to once again have securities and insurance affiliates is known as: (2)

A. The Glass-Steagall Act

B. The Bank Merger Act

C. The Depository Institutions Deregulation and Monetary Control Act

D. The Federal Reserve Act

E. The Graham-Leach-Bliley Act

23) Name and briefly describe the three (3) main tools used by the Central Bank to regulate and influence monetary policy in the US? List them in order of least frequently used to most frequently used: (7)

A) B) C)

24) What is CDARS? What is its benefit, and how does it work? (4)

25) Name one (1) advantage of applying for a National Bank Charter. (1)

26) Name one (1) advantage of applying for a State Bank Charter (1)

27) Your bank has a Bond portfolio that consists of two hundred (200) 6.55% semi-annual bonds that have 9 years left until maturity. Current rates are at 5.55%. What is the Total Present Value of your Bank’s Bond portfolio

) Essay: (15)

Two years ago, you purchased a car from your uncle and have been paying $250.00 a month. You have another year to go. You are now ready to participate in the American Dream, and contemplate buying a house. Current 30-year mortgage rates are at a low annual rate of 4.25%. Your monthly mortgage payment cannot be more than 32% of your gross monthly income. Furthermore, a 20% down payment and 7% closing costs are required on any house that you buy. You want to buy the $425,000 house on Elm Street. The mortgage company has approved your loan. When you tell the mortgage officer about your $250 car payment, he says “If it doesn’t show up on your credit report, we don’t have to consider it. And it will be gone in a year anyway”. You know that the required mortgage payment will be almost impossible to pay until you finish paying car payments, but you don’t want to wait another year because you fear that interest rates and house prices might go up.

Answer the following questions:

a) How much do you need for the down payment? (1) ______________________

b) How much do you need for the closing costs if the closing costs are based upon the cost of the house? (1)

__________________

c) What would be the required mortgage payments for the house? (2) ___________________

d) How much must your annual income have been in order for you to have qualified for the mortgage? (3)

______________________

In a short Essay, answer the following questions:

e) Do you agree with the officer’s comment? Why or why not? (2)

f) If the loan goes bad, who is at fault? Why? (4)

g) What should you do? Why? (2)

 

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