Question 1

CHIPS and ACH are

Accepted Answer

A)  potato products of Frito Lay.
B)  check clearing systems run by the Federal Reserve.
C)  retail payment systems used in Europe.
D)  international bank regulators.
E)  wholesale electronic payment systems.F) A) and E)
G) A) and B)

Question 2

Interest rate risk is probably greatest at which of the following intermediaries?

Accepted Answer

A)  Commercial banks
B)  Savings institutions
C)  Life insurers
D)  Pension fundsE) A) and B)
F) B) and C)

Question 3

Regulators' overall evaluation of the riskiness of a depository institution is measured by the _______________.

Accepted Answer

A)  Basel Accord
B)  CRA rating
C)  CAMELS rating
D)  Exposure scale
E)  FFIEC scoreF) A) and D)
G) A) and E)

Question 4

A bank invests $250 million to add the ability to provide online bill paying for its customers. Usage of the new service is at about 50 percent of expected usage. This is an example of

Accepted Answer

A)  technological risk.
B)  operational risk.
C)  market risk.
D)  credit risk.
E)  derivative risk.F) C) and E)
G) C) and D)

Question 5

The risk that an FI may not have enough capital to offset a sudden decline in the value of its assets is called operational risk.

Accepted Answer

A) True 
 B)False

Question 6

A bank that has made floating rate loans funded by longer maturity deposits is at risk from falling interest rates.

Accepted Answer

A) True 
 B)False

Question 7

In year one,a bank facing reinvestment risk earns 11 percent on its assets and pays 10 percent on its liabilities. In year two,the bank had a negative profit spread of 100 basis points. Which of the following is true? In year two,

Accepted Answer

A)  rates rose 100 basis points.
B)  rates rose 200 basis points.
C)  rates fell 100 basis points.
D)  rates fell 200 basis points.
E)  none of the optionsF) All of the above
G) A) and E)

Question 8

Present value uncertainty is the risk that

Accepted Answer

A)  the market value of equity will decline if interest rates change.
B)  interest income will rise by more than interest expense when rates increase.
C)  assets will be insufficient to cover loan losses.
D)  bank capital will be insufficient to cover loan losses.
E)  real interest rates will exceed nominal rates.F) C) and E)
G) B) and E)

Question 9

In May 2007,the largest known credit card theft was discovered when it was revealed that 200 million card numbers were stolen from TJX Company. This is an example of

Accepted Answer

A)  credit risk.
B)  operational risk.
C)  liquidity risk.
D)  technological risk.
E)  regulatory risk.F) C) and E)
G) A) and D)

Question 10

Many intermediaries,such as banks,cannot be asset transformers and match maturities of their assets and liabilities.

Accepted Answer

A) True 
 B)False

Exam 19: Types of Risks Incurred by Financial Institutions

CHIPS and ACH are

Correct Answer
verified

In May 2007,the largest known credit card theft was discovered when it was revealed that 200 million card numbers were stolen from TJX Company. This is an example of

Correct Answer
verified

Interest rate risk is probably greatest at which of the following intermediaries?

Correct Answer
verified

Regulators' overall evaluation of the riskiness of a depository institution is measured by the _______________.

Correct Answer
verified

Many intermediaries,such as banks,cannot be asset transformers and match maturities of their assets and liabilities.

Correct Answer
verified

A bank invests $250 million to add the ability to provide online bill paying for its customers. Usage of the new service is at about 50 percent of expected usage. This is an example of

Correct Answer
verified

The risk that an FI may not have enough capital to offset a sudden decline in the value of its assets is called operational risk.

Correct Answer
verified

Present value uncertainty is the risk that

Correct Answer
verified

A bank that has made floating rate loans funded by longer maturity deposits is at risk from falling interest rates.

Correct Answer
verified

In year one,a bank facing reinvestment risk earns 11 percent on its assets and pays 10 percent on its liabilities. In year two,the bank had a negative profit spread of 100 basis points. Which of the following is true? In year two,

Correct Answer
verified

Exam 19: Types of Risks Incurred by Financial Institutions

CHIPS and ACH are

Correct AnswerverifiedShow Answer

In May 2007,the largest known credit card theft was discovered when it was revealed that 200 million card numbers were stolen from TJX Company. This is an example of

Correct AnswerverifiedShow Answer

Interest rate risk is probably greatest at which of the following intermediaries?

Correct AnswerverifiedShow Answer

Regulators' overall evaluation of the riskiness of a depository institution is measured by the _______________.

Correct AnswerverifiedShow Answer

Many intermediaries,such as banks,cannot be asset transformers and match maturities of their assets and liabilities.

Correct AnswerverifiedShow Answer

A bank invests $250 million to add the ability to provide online bill paying for its customers. Usage of the new service is at about 50 percent of expected usage. This is an example of

Correct AnswerverifiedShow Answer

The risk that an FI may not have enough capital to offset a sudden decline in the value of its assets is called operational risk.

Correct AnswerverifiedShow Answer

Present value uncertainty is the risk that

Correct AnswerverifiedShow Answer

A bank that has made floating rate loans funded by longer maturity deposits is at risk from falling interest rates.

Correct AnswerverifiedShow Answer

In year one,a bank facing reinvestment risk earns 11 percent on its assets and pays 10 percent on its liabilities. In year two,the bank had a negative profit spread of 100 basis points. Which of the following is true? In year two,

Correct AnswerverifiedShow Answer

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