1. Definition of a bank
A) type of Investment
B) a place where borrower and depositor meets
C) an establishment for the custody, loan, exchange, or issue of money, for the extension of
credit, and for facilitating the transmission of funds
D) driving a thriving financial system regulated by state and federal governments
E) creating financial products and services that benefit businesses and consumers
2. What kind of products is offered to retail customers include various securities-related
products?
A) Investment products
B) Loan products
C) Insurance products
D) Pension’s products
E) Mutual fund products
3. Every financial market has the following characteristic:
A) It determines the level of interest rates.
B) It allows common stock to be traded
C) It allows loans to be made
D) It channels funds from lenders-savers to borrowers-spenders.
E) It determine the level of inflation
4. Markets in which funds are transferred from those who have excess funds available to those
who have a shortage of available funds are called
A) commodity markets
B) financial markets
C) funds markets.
D) derivative exchange markets
E) none of the above
5. The problem created by asymmetric information before the transaction occurs is called
________, while the problem created after the transaction occurs is called_________
A) adverse selection; moral hazard
B) free-riding; costly state verification
C) moral hazard; free-riding
D) moral hazard; adverse selection
E) costly state verification; free-riding
6. An example of the problem of ________ is when a corporation uses the funds raised from
selling bonds to fund corporate expansion to pay for Caribbean cruises for all of its employees
and their families:
 principal–agent problems
 credit risk
 moral hazard


risk sharing
adverse selection
7. Typically, borrowers have superior information relative to lenders about the potential returns
and risks associated with an investment project. The difference in information is called:
 asymmetric information
 risk sharing
 adverse hazard
 moral selection
 free-rider problem
8. Banks are able to minimize the risk of individual loans by diversifying their investments,
pooling risks, screening and monitoring borrowers unlike individual savers:
 duration transformation
 size transformation
 risk transformation
 maturity transformation
 None of above
9. Which of the following belong to maturity transformation in role of banks?
 Extending the loan duration reduces the bank's risk, which in itself brings more profit to the
bank.
 Longer deposit periods reduce the bank's costs and allow it to lend at higher interest rates.
 Banks transform funds lent for a short period of time into medium- and long-term loans.
 Banks are able to minimize the risk of individual loans by diversifying their investments,
pooling risks, and monitoring borrowers unlike individual savers
 Banks collect funds from savers in the form of small size deposits and repackage them into
larger-size loans
10. Which of them is not a direct financial participant.
 Financial intermediaries
 Financial markets
 Borrowers
 Savers
 Depositors
11. Which of the following does not belong to the financial intermediation?
A. Depositor
B. Borrower
C. Banks
D. Saver
E. Real estate firms
12. What is the main role of financial intermediaries in an economy?
A. Refers only to the collection of money from people
B. Control cash flows in circulation and make more profit from transaction.
C. Lend money to people only through its own capital
D. Provide a mechanism by which funds are transferred and allocated to their most productive
opportunities.
E. Help to move funds from parties with missing capital to parties needing funds.
13. Which of the following is not a financial intermediary?
A. Commercial City Bank
B. Savings and Loan Bank
C. New York Stock Exchange
D. Mortgage Savings Bank
E Agro credit Union
14. The main role of _________is to help companies and governments raise funds in the capital
market, either through the issue of stock (otherwise referred to as equity or shares) or debt
(bonds).
A. commercial banks
B. investment banks
C. saving banks
D. co-operative banks
E. credit unions
15. The financial intermediaries that the average person interacts with most frequently are
A. banks
B. finance companies
C. over-the-counter markets
D. Insurance companies
E. exchanges
16) Every financial market has the following characteristic
 It determines the level of interest rates
o It channels funds from lenders-savers to borrowers-spenders
 It allows common stock to be traded
 It allows loans to be made
 It allows bonds to be traded
17) What can be exploited by banks in order to reduce transaction costs?
 İnternational banking, superior information and reduce variable costs
 Economic of scale, econmic feasibilty and asymmetric information
o Superior information, economic of scale and scope
 Economic of scope, more deposit and low cost of capital
 High interest rate, superior information and more consuption loans
18) Which of the following belong to size transformation in role of banks?
 Banks are able to minimize the risk of individual loans by diversifying their investments,
pooling risks, and monitoring borrowers unlike individual savers.


Banks transform funds lent for a short period of time into medium- and long-term loans
Banks want to control a larger money supply by attracting more borrowed money and
deposits.
o Banks collect funds from savers in the form of small size deposits and repackage them into
larger-size loans.
 The bank began to conduct financial transactions on a larger size, participating in foreign and
direct financial markets.
19) Banks are able to minimize the risk of individual loans by diversifying their investments,
pooling risks, screening and monitoring borrowers unlike individual savers.
o risk transformation
 maturity transformation
 size transformation
 duration transformation
 None of above
20) Internet banking refers to
 Opening of account through ATM
 Taking loan in bank
 Opening of account in branch of bank
 None of above
o Operation of account through internet
21.The primary relationship between a banker and customer starts from the time
 when customer visits the bank
 when customer visits that bank to made queries
 when customer call the bank
 when customer opens account
 Taking loan through ATM
22.Credit cards
 are used to control access to a resource of a card
 mainly provide a limit to for make payments
 do not require you to pay what you spend
 in most cases provide additional money without interest to your account
 allow you to withdraw your salary from your account
23. Debit cards
 provide additional money to your account
 require you to pay back to the card account what you spend
 allow you to take your money from your account


are used to control access to a resource of the card
provide a limitless credit for make payments
24. Supervisory re-regulation
 restricts competition among local commercial banks
 the process of becoming traditional banking system
 the removal of free entry to or exit from banking sector
 cancels all government’s interventions over the system
 improves safety and soundness of the overall financial sector
25. Financial crises
 are major disruptions in financial markets that are characterized by sharp declines in asset
prices and the failures of many financial and nonfinancial firms
 occur when adverse selection and moral hazard problems in financial markets become more
significant.
 frequently lead to sharp contractions in economic activity
 are all of the above
 do both (a) and (b).
26. Both
rate.
and
were financial innovations that occurred because of interest
A. adjustable-rate mortgages; financial derivatives
B. adjustable-rate mortgages; commercial paper
C. sweep accounts; financial derivatives
D. sweep accounts; commercial paper
E. commercial paper, fixed-rate mortgagaes
27. A debit card differs from a credit card in that:
A. a debit card is a loan while for a credit card purchase, payment is made immediately.
B. a credit card is a loan while for a debit card purchase, payment is made immediately.
C. a credit card is a long-term loan while a debit card is a short-term loan
D. a debit card is a long-term loan while a credit card is a short-term loan
E. a debit card is a long-term loan while a credit card is interest-free loan
28. The process in which people take their funds out of the banking system seeking
higher -yielding securities is called:
A. capital mobility.
B. deposit jumping.
C. disintermediation.
D. loophole mining
E. capital flight
29. The decline in traditional banking internationally can be attributed to:
A. increasing monopoly power of banks over depositors.
B. increased regulation
C. increased protection from competition.
D. improved information technology.
E. decreased protection from competition
30. The ability to use one resource to provide different products and services is:
A. diversification.
B. economies of scale.
C. vertical integration.
D. disintermediation
E. economies of scope.
31. When we refer to the shadow banking system, what are we talking about?
A. The subsidiaries of depository institutions
B. all of the above
C. None of the above
D. Hedge funds, investment banks, and other nonbank financial firms that supply liquidity
E. The "underground" banking system used for illegal activities
32. Which of the following financial institutions holds the largest percentage of U.S. government
securities?
A. Finance companies
B. Savings and loans institutions
C. Central bank
D. Credit unions
E. Commercial banks
33. Which of the following are reported as liabilities on a bank's balance sheet?
A. reserves
B. discount loans
C. cash items in the process of collection
D. State government securities
E. all of the above
34. Select the deposit-taking institution (DTI)
A. Pension funds
B. Insurance companies
C. Trust companies
D. Commercial banks
E. Building societies
35. Which of following explain why financial intermediation (banking) exists
A. delegated monitoring
B. information production
C. all of above
D. consumption smoothing
E. liquidity transformation
36. Which of the following belong to size transformation in role of banks?
A. Banks collect funds from savers in the form of small size deposits and repackage them into
larger-size loans.
B. Banks want to control a larger money supply by attracting more borrowed money and
deposits.
C. Banks transform funds lent for a short period of time into medium- and long-term loans
D. Banks are able to minimize the risk of individual loans by diversifying their investments,
pooling risks, and monitoring borrowers unlike individual savers.
E. The bank began to conduct financial transactions on a larger size, participating in foreign and
direct financial markets.
37.Which of the following components belongs to modern banking?
A. only loan and deposit
B. asset size and growth
C. supply led
D. commission fee
E. all of above
38. Which of the following components belongs to traditional banking?
A. commission fee
B. asset size and growth
C. demand led
D. all of above
E. universal products
39. _____________business consisted of taking deposits and making loans and the majority of
their income was derived from lending business.
A. Classic banking
B. Traditional banking
C. Investment banking
D. International banking
E. Modern banking
40. One of the following is the most diversified type of depository institution
A. savings associations
B. commercial banks.
C. finance companies.
D. mutual funds.
E. credit unions.
41. Which of the following are commonly functions of the Central Bank? I. Conduct of monetary
policy II. Lending to the general public III. Supervision the stock market IV. Lending to the
commercial banks
A 1 and 3
B 1, 2 and 4
C All of the above
D 1 and 4
E 2 and 4
42. Which of the following are correctly describes the Money Creation function of a bank?
A. The process by which a bank borrows money from one source to give it to another part that
needs funding
B. All of the above
C. The process by which additional assets are created through effectively loaning a deposit
multiple times through fractional reserve banking
D. The process by which a bank transforms the asset of depositors into a new asset with different
characteristics
E. The process by which a bank transforms the asset of central bank into a new asset with
different characteristics
43. Based on only a bank’s customer focuses orientation, banking can be classified into: I. Retail
Banking II. Corporate Banking III. Universal Banking IV. Postal Banking
A. All of the above
B. None of the above
C. I and IV
D. I and II
E. I, II and III
44. In banks, loans and advances are considered:
A. None of these
B. Expenditure
C. Resources
D. Liabilities
E. Assets
45. Issued equity
A. is a financial liability
B. does not generate capital
C. includes the stock a bank sells to the public
D. comes from a loan issued by a bank
E. is a financial asset
46.Excel de shert verilmiyib
A.Private banks
B.Investment banks
C.Commercial banks
D.Saving banks
E.Insurance companies
47. Which one is correct about balance sheet?
A.Deposits from public are written in a liability side of a balance sheet
B.It is the only financial statement shows bank’s performance
C.It shows the profit of a bank
D.It includes revenue and costs
E.It has same structure for all financial institutions
48. Which of the following is a type of plastic cards?
A.Cheques paper
B.Time deposit account
C.Credit card
D.Investment products
E.Standing order
49. Retained earnings
A.equal to Beginning Retained Earnings
B.are expenditure for today’s activities
C.are liability for a bank
D.equal to shareholders' dividend
E.might be indicated in income statement
50. Which of the following are correctly describes the Asset Transformation function of a bank?
A.The process by which a bank transforms the asset of central bank into a new asset with
different characteristics
B.The process by which additional assets are created through effectively loaning a deposit
multiple times through fractional reserve banking
C.The process by which a bank borrows money from one source to give it to another part that
needs funding
D.The process by which a bank transforms the asset of depositors into a new asset with different
characteristics
E.All of the above
51. Offer products and services to individual consumers including checking and savings
accounts, loans, mortgages, and credit cards
A. Investment Banks
B. Community Banks
C. Commercial Banks
D. Central Banks
E. Retails Banks
52. Work with small, medium, and large businesses to serve their financial needs by offering
services such as business loans and trade finance
A. Retails Banks
B. Investment Banks
C. Central Banks
D. Commercial Banks
E. Community Banks
53. Operate in the capital markets to help clients raise capital through underwriting and
issuance of securities
A. Investment Banks
B. Community Banks
C. Commercial Banks
D. Retails Banks
E. Central Banks
54. Full-service banks that offer retail banking, commercial banking, and investment banking
services to any potential client
A. Universal Banks
B. Investment Banks
C. Central Banks
D. Commercial Banks
E. Retails Banks
55. Financial institutions that serve a specific demographic and are owned by members
A. Central Banks
B. Universal Banks
C. Investment Banks
D. Credit Unions
E. Commercial Banks
56. Banks that focus on serving individual consumers and owner-operated small companies,
and tend to focus on their immediate community
A. Investment Banks
B. Community Banks
C. Universal Banks
D. Central Banks
E. Commercial Banks
57. Banks that offer retail and small business banking services through online platforms
A. Credit Unions
B. Central Banks
C. Online Banks
D. Investment Banks
E. Commercial Banks
58. Banks that focus on helping clients access capital markets and raise capital
A. Investment Banks
B. Central Banks
C. Credit Unions
D. Commercial Banks
E. Online Banks
59. Serves owner-operated businesses with an annual revenue of up to $5 million and have a
need for loans of less than $1 million
A. Commercial Banks
B. Credit Unions
C. Large Banks
D. Business Banking
E. Retails Banks
60. Serves medium-sized business with up to 500 employees and multiple operating locations
A. Business Banking
B. Commercial Banks
C. Retails Banks
D. Large Banks
61. Serve businesses with over $100 million in revenue that are growing through mergers and
acquisitions or moving into the publicly traded space
A. Business Banking.
B. Commercial Banks
C. Large Banks
D. Corporate Banks
E. Retails Banks
62. Mr. Sampson has $2 million in cash sitting in an operating account and is looking to invest in
the stock market and earn profits on a portfolio of equities. He is most likely to seek what
service?
A. Large Banks
B. Business Banking.
C. Retails Banks
D. Private Banking
E. Commercial Banks
63. Technology Inc. is a software company based in the US, with over 600 employees in 10
locations across the country. The company has recently signed a EUR 2 mln contract with a
European supplier and is looking for foreign exchange service to help facilitate the transaction.
This is an example of services which would be provided in:
A. Large Banks
B. Retails Banks
C. investment banking
D. Commercial Banks
E. Business Banking.
64. Which of the following is NOT a typical product or service offered in retail banking?
A. debt and credit cards
B. tax advisory service
C. chequing/checking and savings account
D. mortgages
E. personal loans
65. Which of the following items is NOT found on the asset side of a bank’s balance sheet?
A. loans (both current and non-current)
B. deposits
C. mortgages
D. trading assets
E. debt and credit cards
66. Historically, a commercial bank was defined as a firm that:
A. accepted government deposits and made public loans.
B. accepted demand deposits and made consumer loans.
C. is regulated by the Federal Reserve.
D. accepted NOW accounts and made consumer loans.
E. accepted demand deposits and made business loans.
67. Which Act separated commercial banking, investment banking and insurance into three
separate industries?
A. Competitive Equality Banking Act
B. McFadden Act
C. Federal Reserve Act
D. Glass-Steagall Act
E. Bank Holding Act
68. What is one of the primary appeals at online banking?
A. lack of face-to-face interaction
B. prevention of identity theft
C. the ability to make small dollar purchases
D. high-volume traffic
E. its convenience
69. In the United States a commercial bank qualifies as a "bank" under federal law if it offers:
A. Security investments, inventory loans to business customers
B Commercial deposit accounts, consumer savings plans
C. Checking accounts, commercial loans
D. Savings deposits, commercial loans
E. Consumer installment loans, CDs
70. Banks perform the indispensable task of:
A. Creating money without making loan
B. None of the above
C. Absorbing the excess liquidity created by other financial institutions
D. Issuing risky deposits
E. Intermediating between surplus-spending individuals or institutions and deficit-spending
individuals or institutions
71. Smaller, locally focused commercial and savings banks that offer narrower but more
personalized menu of financial services are known as:
A. State banks
B. Money center banks
C. Community banks
D. Fringe banks
E. Mutual Funds
72. The banking services that includes executing buy and sell orders for security trading
customers and marketing new securities to raise funds for corporations and other institutions is
referred to:
A. Investment Banking
B. Professional Banking
C. Comprehensive Packaging
D. Private Banking
E. Wrap-around Accounts
73. ___________is a subset of retail banking that caters to high-net-worth and ultra-high-networth individuals.
A. Business Banking
B Retails Banking
C. Private Banking
D. Commercial Banking
E. Large Banking
74. Which of the following is considered a depository financial institution?
A. Mutual fund
B. Insurance company
C. Federal Reserve
D. Savings and Loan associations
E. Mortgage company
75. During the financial crisis of 2007-2009, the collapse of Lehman Brothers and the bailout of
Bear Stearns reaffirmed the importance of the fundamental principle of:
A. Public trust and confidence in the system
B. Regulatory arbitrage
C. Government bailout
D. Superior management
E. Globalization
76. Which of the following types of banks would most likely offer the largest number of
financial services?
A. An international bank
B. A retail bank
C. A commercial bank
D. A community bank
E. A universal bank
77. Jonathan has an account in a bank that does not have a physical branch. Jonathan does all
of his banking business over the internet. What type of bank does Jonathan have his account
at?
A. Community Bank
B. Mortgage Bank
C. None of the above
D. Affiliated Bank
E. Virtual Bank
78. The Edmond National Bank serves only the City of Edmond, Oklahoma and concentrates on
providing the best possible service to this city. What type of bank is this most likely to be?
A. Mortgage Bank
B. None of the above
C Mortgage Bank
D. Affiliated Bank
E. Community Bank
79. The main role of _________is to help companies and governments raise funds in the capital
market, either through the issue of stock (otherwise referred to as equity or shares) or debt
(bonds).
A. saving banks
B co-operative banks
C. credit unions
D. commercial banks
E. investment banks
80. ____________are a special category of loans in which an arranger, or group of arrangers,
forms a group of creditors on the basis of a mandate to finance the company (or government)
borrower.
A. Trade credit
B. Eurodollar loan
C. Commercial paper
D. Long-term financing
E. Syndicated loans
81. All of the following are operating expenses for a bank except
 employee benefits
 service charges on deposit accounts
 rent on buildings
 servicing costs of equipment such as computers
 salaries
;
82. An important financial institution that assists in the initial sale of securities in the primary
market is the:
 commercial bank.
 stock exchange.
 investment bank
 brokerage house
 credit union
83. When an investment bank ________ securities, it guarantees a price for a corporationʹs
securities
and then sells them to the public.
 underwrites
 undertakes
 overwrites
 overtakes
 finances
84. Deposit insurance was increased to __________ per depositor in 2008.
 $100,000
 $300,000
 150000
 500000
 $250,000
85. The primary appeal of online banking is:
 prevention of identity theft.
 high-volume traffic.
 its convenience.
 lack of face-to-face interaction.
 e. the ability to make small dollar purchases.
86. Which of the following is not a channel for delivering banking services?
A. Retail banking.
B. Mobile banking..
C. Online banking
D. Automated Teller Machines.
E. Branch banking.
87. What types of banking service is offered to small firms
A. fund management services.
B. securities underwriting services
C. foreign exchange and interest rate-related transactions
D. commitments and guarantees.
E. special financing
88. _________________provide finance to individuals (and also companies) by making
consumer, commercial and other types of loans.
__________typically do not take deposits and raise funds by issuing money market and capital
market instruments.
A. Co-operative banks
B. Finance companies
C. Saving banks
D. Private banking
E. Corporate banking
89. What types of banks offers retail banking services?
A. savings banks;
B. building societies;
C. commercial banks;
D. All of above
E. finance houses.
90. Banks with less than ___________in assets are generally called community banks
A. More than $10 billion
B. More than $1 billion
C. Less than $1 billion
D. Less than $1 trillion
E. More than $1 trillion
91. Investment banks that are part of ________ are regulated and supervised like banks.
 bank holding companies
 insurance companies
 Freddie Mac
 Conmercial banks
 Fannie Mae
92. The Glass-Steagall Act, before its repeal in 1999, prohibited commercial banks from
 issuing equity to finance bank expansion.
 selling new issues of government securities.
 engaging in underwriting and dealing of corporate securities.
 purchasing any debt securities
 Selling any debt security
93. Financial innovations occur because of financial institutions search for ________.
 Fame
 stability
 recognition
 competition
 profits
94. The most significant change in the economic environment that changed the demand for
financial products in recent years has been
 the dramatic increase in the volatility of interest rates
 the aging of the baby-boomer generation
 the dramatic increase in competition from foreign banks.
 the deregulation of financial institutions.
95. The inaccurate ratings provided by credit-rating agencies
 were irrelevant since no one pays any attention to them anyway.
 meant that investors did not have the information they needed to make informed choices
about their investments
 meant that investors actually took on less risk.
 meant that investors actually took high risk.
 will not be a problem when determining capital requirements under Basel 2
96. What is called the interest rate at a loan that is charged for commercial banks from the central
bank?
 discount rate
 yield
 repo
 policy rate
 refinancing
97. Which of the following best describes the SWIFT?
 way to execute small, however recurring retail payments through e-carriers and integrate
governmental entities maintaining payment operations
 Only A and B
 Only B and C
 It is a messaging network that financial institutions use to securely transmit information and
instructions through a standardized system of codes
 enables to realize on-line interbank transactions, considerably increase money circulation
intensity, and more flexibly manage liquidity by banks
98. What country is given credit for the birth of the Eurodollar market?
 The United States
 Japan
 The Soviet Union
 England
 China
99. The spectacular growth in international banking can be explained by
 the 1988 Basel Agreement.
 the rapid growth in international trade
 the desire for U.S. banks to escape burdensome domestic regulations.
 the creation of the World Trade Organization
 the creation of the IMF
100. U.S. dollar deposits in foreign banks outside the U.S. or in foreign branches of U.S. banks
are called ________.
 Atlantic dollars
 foreign dollars
 Eurodollars
 outside dollars

European Currency Units.
101. What interest rate is considered as a benchmark for which global banks lend to one another
for short-term loans?
 LIBOR
 treasury yield
 coupon yield
 KIBOR
 federal rate
102. What kind of trade finance are proved on the banking system to help facilitate the import
and export of goods in international trading activity?
 letter of security, factoring and barter
 syndicated loan, invoice discounting and asset-based finance
 asset-based finance, forfaiting and countertrade
 letter of credit, forfaiting and countertrade
 exchange, eurodollar loan and factoring
103. The main center of the Eurodollar market is
 Basel.
 Paris.
 New York
 Moscow
 London.
104. Deposits in European banks denominated in dollars for the purpose of international
transactions are known as
 European Currency Units.
 Eurodollars.
 European Monetary Units.
 International Monetary Units.
 Spacial Drawing Rights
105. The difference between the bid price and the ask price in a forex quote is normally called
_____.
 Margin
 Bid rate
 Spread
 Ask rate
 Discount rate
106. What kind of trade finance are proved on the banking system to help facilitate the import
and export of goods in international trading activity?
 letter of credit, forfaiting and countertrade
 syndicated loan, invoice discounting and asset-based finance



letter of security, factoring and barter
exchange, eurodollar loan and factoring
asset-based finance, forfaiting and countertrade
107. What is forfaiting transaction in international trading activity?
 This a legal banking agreement that allows importers to offer secure terms to exporters and
from a bank guarantees the seller that, if various documents are presented, the bank will pay
the seller the amount du
 It is a general term used to cover a variety of commercial mechanisms for reciprocal trade
and used probably the oldest and best-known example; however, other techniques such as
switch-trading, buy-back, counter-purchase and offset have develope
 Such an agreement offers security to the seller, as it is an assurance of payment from an
international bank, on the condition that the terms of the letter of credit are complied with.
 This is one for which the arrangers guarantee the entire commitment and then syndicate the
loan to other banks and institutional investors
 It refer to the exporter agrees to surrender the rights to claim for payment of goods or
services delivered to an importer under a contract of sale, in return for a cash payment from a
bank.
108. In this transaction, the borrower enters into a single credit agreement with a group of
lenders covering all of the loan facilities provided to the borrower by the lenders. Transaction
agreement might take the place of multiple bilateral credit agreements between the borrower and
each lender or be used in lieu of a participation because all of the lenders are in privity with the
borrower. The explanation is related to:





syndicated loans
participation loans
letter of credit
factoring
integrated loans
109. What is a multinational banking?
 It suggests that overseas activity occurs so that firms can take advantage of international
factor price differences.
 It refers to banks having some element of ownership and control of banking operations
outside their home market.
 It means that in many areas of business (and particularly in banking) it may be difficult to
undertake cross-border activity without a physical presence within a country.
 This means that in many areas of business it may be difficult to undertake cross-border
activity without a physical presence within a country.
 It states that the investment decisions of banks stem from a conscious effort by managers to
diversify earnings and therefore reduce risk.
110. The main theories describing the motives for overseas expansion relate to:

low cost, high arbitrage; high price and trade opportunity; ownership disadvantage; high
managerial skills; investment opportunity;
 diversification of income; economic environment; demographic advantage; consumer
differentiation; attract more capital; technological advantage
 factor price differentials; trade barriers; arbitrage and the cost of capital; ownership
advantages; diversification of earnings; excess managerial capacity;
 factor price differentials; trade barriers; high arbitrage; high price and trade opportunity;
technological advantage; investment opportunity
 diversification of income; economic environment; ownership disadvantage; high managerial
skills; diversification of earnings; excess managerial capacity;
111. By expanding into different markets, banks expose their operations to the risk and return
profile of specific business areas is referred to as:
A)
B)
C)
D)
E)
Diversification of earnings
Ownership advantages
Location and the product life cycle
Obtaining a foothold strategy
Customer-following strategies
112. Which of the following applies to the practice of bank expansion in foreign markets?
A)
B)
C)
D)
E)
Obtaining a foothold strategy
Follow-the-leader strategy
Performance and efficiency advantages
Managerial motives
All of above
113. Entrenched managers may make international investment decisions based on their own
preferences for pay, power, job security, risk aversion and so on. It is related to:
A)
B)
C)
D)
E)
Diversification of earnings
Managerial motives
Excess managerial capacity;
Follow-the-leader strategy
Performance and efficiency advantages
114. When a large bank undertakes investment in a foreign market it may well encourage others
to follow is referred to as:
A) Customer-seeking strategies
B) Customer-following strategies
C) Managerial motives
D) Follow-the-leader strategy
E) Theory of excess managerial capacity
115. One of the main objectives of the EU’s Single Market Programme has been to reduce
barriers to trade in banking and financial services across all member countries in order to
encourage foreign bank expansion.
A)
B)
C)
D)
E)
Government motives
Location and the product life cycle
Diversification of earnings
Arbitrage and the cost of products
Managerial motives
116. Meaning of Correspondent banking could be explained as:
A. It is usually small and they cannot provide banking business – that is, they cannot take any
transaction as deposits or making loans and used to prospect for new business and they usually
act simply as marketing offices for parent banks.
B. This simply involves using a bank located in the overseas market to provide services to a
foreign bank. Typically, this kind of banks would be used by other ones to do business in
markets where they have no physical presence and as such these types of services are widely
used by smaller banks
C. It is a separate legal entity from the parent bank, has its own capital and is organized and
regulated according to the laws of the host country.
D. It is similar to branches in that they form an integral part of the parent bank and lie
somewhere between branches and representative offices as they can do less than the former
and more than the latter.
E. It can perform all the functions that are allowed by the banking authorities of the host
country, namely taking loans and making deposits, as well as selling other types of products and
services.
117. The main function of a Central Bank can be each of one except:
A. The central bank controls the issue of notes and coins
B. The central bank also acts as the official agent to the government in dealing with all its gold
and reserves
C. The central bank could also deal with the general public to provide funds
D. The central banks act as the Government’s bank
E. All of the above
118. yoxdu
119. Central Bank can serve as a lender of last resort because of:
A. Only the central bank has the opportunity to lend at lower interest rates and in larger
amounts
B. The interest rates they charge are so high that banks are virtually never willing to borrow
from the central bank
C. Banks are more likely to borrow money from their depositors during a financial panic
D. They have the ability to create money to stimulate banks
E. All of the above
120. Instrument independence means the central bank is free from
A. political pressure regarding how it uses the tools of monetary policy
B. political pressure regarding the goals it pursues.
C. both A and B of the above
D. neither A nor B of the above
E. all of the above
121. "The government institution that has responsibility for the amount of money and credit
supplied
in the economy as a whole is the
A. commercial bank.
B. bank of settlement.
C. central bank.
D. monetary fund.
E. investment bank
122. A lender of last resort is a service to commercial banks from the central bank, because:
A. they are the only financial institution that is legally allowed to make loans during a financial
panic
B. banks are more likely to borrow money from their depositors during a financial panic
C. because only the central bank has the opportunity to lend at lower interest rates and in larger
amounts
D. the interest rates they charge are so high that banks are virtually never willing to borrow from
the central bank
E. they have the ability to create money to stimulate banks
123. "Which of the following is the most flexible of the Central Bank`s tools for implementing
monetary policy?
A. Changes in the fed funds rate
B. Changes in the required reserve ratio
C. Changes in the discount rate
D. Open market operations
E. Private placements
124. One of them is not considered as a main function of a central bank.
A. The central bank also acts as the official agent to the government in dealing with all its gold
and foreign exchange matters
B. A central bank acts as the government’s banker
C. A central bank could also deal with the general public to provide funds.
D. It has the power to control the amount of credit-money created by banks
E. The central bank controls the issue of notes and coins (legal tender)
125. "Which of the following is not a fundamental function of the Central Bank?
A. Ensure bank profitability.
B. Conduct the nation’s monetary policy.
C. Provide an effective payments system.
D. Regulate banking operations.
E. All of the above are fundamental functions of the Federal Reserve.
126. One of them is considered as a deposit-taking institution (DTI)
A. Investment trust companies.
B. Building societies
C. Pension funds
D. Retail banks
E. Insurance companies
127. _________ is concerned with the actions taken by central banks to influence the availability
and cost of money and credit by controlling some measure (or measures) of the money supply
and/or the level and structure of interest rates.
A. Credit policy
B. Interest rate policy
C. Exchange rate policy
D. Fiscal policy
E. Monetary policy
128. ___________ includes the targeting of a particular value of a country’s foreign exchange
rate thus affecting the cash flows within the balance of payments (BoP).
A. Fiscal policy
B. Exchange rate policy
C. Monetary policy
D. Interest rate policy
E. Credit policy
129. __________ is concerned any changes in the level and structure of government spending,
as well as taxation to affect the economy.
A. Exchange rate policy
B. Monetary policy
C. Interest rate policy
D. Fiscal policy
E. Credit policy
130. Which is not an open market operation?
A. Purchasing and selling foreign exchange.
B. Central banks conduct auctions of reserves as repurchase agreements.
C. Making loans
D. Central banks conduct auctions of reserves as repurchase agreements.
E. none of the above
131. What is the central bank able to control by printing money?
A. Government expenditures
B. The unemployment rate
C. Tax revenues
D. The availability of money and credit in a country's economy.
E. The availability of deposit in a country’s economy
132. Oversee and manage all the banks in their respective country and set monetary policy
A. Community Banks
B. Central Banks
C. Retails Banks
D. Commercial Banks
E. Investment Banks
133. Which of following is major form of economic policy conducted by governments?
A. Monetary policy
B. Exchange rate policy
C. Prices and incomes policy
D. Fiscal policy
E. All of above
134. The main functions of a central bank can be each of the following EXCEPT:
A. The central bank controls the issue of notes and coins (legal tender)
B. A central bank acts as the government’s banker
C. The central bank also acts as the official agent to the government in dealing with all its gold
and foreign exchange matters
D. A central bank could also deal with the general public to provide funds.
E. It has the power to control the amount of credit-money created by banks
135. Central banks can serve as a lender of last resort because:
A. they are the only financial institution that is legally allowed to make loans during a financial
panic
B. banks are more likely to borrow money from their depositors during a financial panic
C. they have the ability to create money to stimulate banks
D. the interest rates they charge are so high that banks are virtually never willing to borrow from
the central bank
E. because only the central bank has the opportunity to lend at lower interest rates and in larger
amounts
136. One of them is not the specific goals of central banks.
A. high and stable real income
B. high and stable real growth
C. low and stable inflation
D. low and stable unemployment rates
E. high levels of imports
137. Which of the following is the most flexible of the Fed’s tools for implementing monetary
policy?
A. Changes in the discount rate
B. Changes in the required reserve ratio
C. e. Private placements
D. Changes in the fed funds rate
E. Open market operations
138. The rationale for the "lender of last resort" function of central banks is to:
A. Provide high income investors with access to business loans
B. provide low-income households with access to mortgage loans
C. increase bank lending to firms that are at risk of bankruptcy.
D. protect depositors and reduce the likelihood of the contagion effect
E. encourage banks to hold more reserves.
139. _________ is concerned with the actions taken by central banks to influence the
availability and cost of money and credit by controlling some measure (or measures) of the
money supply and/or the level and structure of interest rates.
A. Exchange rate policy
B. Interest rate policy
C. Monetary policy
D. Fiscal policy
E. Credit policy
140. ____________involves the targeting of a particular value of a country’s currency exchange
rate thereby influencing the flows within the balance of payments.
A. Fiscal policy
B. Interest rate policy
C. Exchange rate policy
D. Monetary policy
E. Credit policy
141. The specific goals of central banks include each of the following EXCEPT:
A. high levels of imports
B. high and stable real growth
C. low and stable unemployment rates.
D. low and stable inflation.
E. high and stable real income
142. Goal independence is the ability of ________ to set monetary policy ________.
A. the central bank; goals
B. the central bank; functions
C. the central bank; instruments
D. Congress; goals
E. Congress; instruments
143. In its role as the bankers' bank, a central bank performs each of the following except:
A. Overseeing commercial banks and the financial system
B. Providing deposit insurance
C. Providing loans during times of financial distress.
D. Managing the payments system.
E. Make low and stable inflation.
144. The organization responsible for the conduct of monetary policy in the United States is the
A. Bureau of Monetary Affairs
B. Federal Reserve System
C. U.S. Treasury
D. Central bank
E. Comptroller of the Currency
145. The Federal Reserve entity that determines monetary policy strategy is the
A. Federal Open Market Committee
B. Board of Governors
C. none of the above
D. Shadow Open Market Committee
E. Chairman of the Board of Governors.
146. The U.S. banking system is considered to be a dual system because
A. banks offer both checking and savings accounts.
B. it is regulated by both state and federal governments.
C. it was established before the Civil War, requiring separate regulatory bodies for the North
and South.
D. it actually includes both banks and thrift institutions.
E. it actually includes only investment banks
147. Which of the following is not a fundamental function of the Federal Reserve?
A Ensure bank profitability.
B. All of the above are fundamental functions of the Federal Reserve.
C. Provide an effective payments system.
D Conduct the nation’s monetary policy.
E. Regulate banking operations.
148. Which of the following is not one of the Fed’s monetary policy tools?
A. Changes in the required reserve ratio
B. Changes in the fed funds rate
C. Open market operations
D. All of the above are monetary policy tools of the Fed
E. Changes in the discount rate
149. Which of the following is the most flexible of the Fed’s tools for implementing monetary
policy?
A. Private placements
B. Changes in the required reserve ratio
C. Open market operations
D. Changes in the discount rate
E. Changes in the fed funds rate
150. ATMs were developed because of breakthroughs in technology and as a
A. means of avoiding paying interest to corporate customers.
B. way of concealing transactions from the SEC.
C. increasing the competition from foreign banks.
D. increasing the competition from investment banks.
E. means of avoiding restrictive branching regulations
151. Which of following is responsible for maintaining price stability and, subject to that,
supporting the economic policy of the government,
including its objectives for growth and employment in decision-making bodies of the Bank of
England?
A) The Prudential Regulation Authority (PRA)
B) The Financial Conduct Authority (FCA).
C) Monetary Policy Committee (MPC)
D) Financial Policy Committee (FPC),
E) None of above
152. Main bank in Azerbaijan is:
 Kapital Bank of Azerbaijan
 Central Bank of Azerbaijan
 International Bank of Azerbaijan
 Agriculture Bank of Azerbaijan
 National Bank of Azerbaijan
153. The primary goal of the Central Bank's activity is
A. to delivery of the report to Cabinet of Ministers of the Azerbaijan Republic four times a year
B. to ensure price stability
C. making profit
D. issue loans to the state to directly fund the state budget deficit
E. purchase of debt securities issued by the foreign governments
154) The Central Bank shall be solely accountable on its activities: to
 Milli Mejlis of the Republic of Azerbaijan
o President of the Republic of Azerbaijan
 Ministry of Finance of the Republic of Azerbaijan
 Cabinet of Minsiters Republic of Azerbaijan
 Minsitry of Economy of the Republic of Azerbaijan
155. Which of the following is not the work of Central Bank of Azerbaijan?
 maintain and manage international gold and foreign exchange reserves
 allocating funds directly to the farmers for agricultural development
 develop the country’s foreign debt statistics and international investment balance
 establish and implement the country’s monetary and foreign exchange policy
 regularly set and announce an official exchange rate of Manat
156. The Chairman of the Management Board of the Central Bank shall advise the Milli Majlis
of the Republic of Azerbaijan:
A. on main directions of fiscal policy.
B. on key directions of monetary policy.
C. on key directions of exchange rate policy
D. on key directions of debt management policy
E. on key directions of social policy
157. The Central Bank capital consists of……..and equils to……..AZN.
A. gold and precious metal, AZN 650 million
B. its charter fund and capital reserves, AZN 500 million
C. foreign currency reserves, AZN 900 million
D. its charter fund and capital reserves, AZN 100 million
E. debt securities issued by foreign countries,, AZN 500 million
158.The Central Bank of Azerbaijan shall engage in the following open market transactions:
A. setting interest rates; setting reserve requirements for credit institutions;
B. setting interest rates; trade with foreign currency. setting reserve requirements for credit
institutions; maintenance of deposit transactions;
C. setting reserve requirements for credit institutions; maintenance of deposit transactions;
D. trade transactions with government securities, refinancing of credit institutions; maintenance
of deposit transactions;
E. trade transactions with government securities, trade with its own securities; trade with foreign
currency.
159. Azerbsijan gold-foreign exchange reserves composed of:
A. only foreign currency and foreign currency reserves of the Central Bank, and debt securities
issued by foreign countries.
B. only gold and precious metals and foreign currency reserves of the Central Bank
C. only foreign currency reserves of the Central Bank, debt securities issued by foreign
countries, other reserve assets internationally accepted.
D. gold, precious metals, foreign currency, foreign currency reserves of the Central Bank, debt
securities issued by foreign countries, other reserve assets internationally accepted.
E. only precious metals, foreign currency and debt securities issued by foreign countries.
160. The main objectives of economic (and monetary) policy include all expect
A.High employment
B.Price stability
C.Stable economic growth
D.High interest rate
E.Stable financial markets
161. What does commercial banks probably tend to hold if there is not any government
regulation?
A. too little capital
B. too much capital, reducing the creditability of banks.
C. too much capital, making it more difficult to obtain loans.
D. too much capital, reducing the efficiency of the payments system.
E. too much capital, reducing the profitability of banks.
162. Bank regulations:
A. can prevent bank failures.
B. serve as guidelines for sound operating policies.
C. guarantee bankers will make sound management decisions.
D. guarantee bankers act in an ethical manner.
E. can eliminate economic risk for banks.
163. Overseeing who operates banks and how they are operated is called ________.
A. hazard insuranceB. setting interest rates;
B. prudential supervision
C. regulatory interference
D. moral regulation
E. loan loss reserves
164. The current supervisory practice toward risk management
A. determines whether capital requirements have been met.
B. focuses on decreasing credit risk.
C. focuses on eliminating all risk.
D. evaluates the soundness of a bankʹs risk-management process
E. focuses on the quality of a bankʹs balance sheet.
165. Agreements such as the ________ are attempts to standardize international banking
regulations.
A. WTO Accord
B. Basel Accord
C UN Bank Accord
D. IMF Accord
E. GATT Accord
166. The evidence from banking crises in other countries indicates that
A. deposit insurance is to blame in each country.
B. deregulation combined with poor regulatory supervision raises moral hazard incentives.
C. none of above
D. regulatory forbearance never leads to problems.
E. a government safety net for depositors need not increase moral hazard.
167. Liquidity GAP is definied as;
 the lack of the ability easily convert an asset or security into the cash.




the uneffective use of cash flows to meet the banks liquidity needs
to match the terms of the liabilities with the terms of the assets
the mismatch between the different terms of assets and liabilities across the term structure;
the risk of llosing stand by credit lines
168. Interest rate GAP is definied as
A. compares rate-sensitive assets with rate-sensitive liabilities across 7-14 days, and 30-90 days
time buckets
B. the mismatch between the different interest rates that each asset or liability contract has
been struck at.
C. the potential for investment losses that result from a change in interest rates.
D. Keeping all interest rates constant
E. Manage banks assets and liabilities on a strategic level
169. Open market purchase by Central bank are
 buying government securities
 selling government securities
 discount rate
 reserve requirement
 foreign direct investment
170. Sold and bought securities by Central bank are called
 reserve requirments
 setting discount rate
 refinancing financial institutions
 lender of last resort function
 open market operations
171. Which kind of risk indicates the possibility of future change in price of asset which
leads to loss of return?
 liquidity risk
 interest rate risk
 foreign exchange risk
 market risk
 credit risk
1. Deficit unit is the one





Whose total expenditure is less than total income
Who has a financial liability
Who is a lender
Who holds a financial claim
Who works in a bank
2. Surplus unit is the one





Whose total expenditure is more than total income
Who is borrower
Who holds a financial claim
Who has a financial liability
Who works in a bank
3. Function of financial markets





increases interest rates
makes income
stops infilation
makes more investment
Improves economic efficiency
4. Borrowers want





to find a loan at a particular date
to maximize a substantial searching cost
to pay extra interest
to maximize counterparty risks
always small-size loan
5. Choose the best answer to define a financial claim

Represents the amount the costumer must pay before the financial institution will pay the
claim.
 Allowing the other party to make payments at will
 İt is a claim the amount the customer must pay before spend funds.
 It is a claim to the payment of a futurte sum of money and/or a periodic payment of money
 None of above
6. Select the answer that does not belong to financial intermediation?





Investment banks
Real estate business
Depositor
Commercial banks
Borrower
7. Economies of scale enable financial institutions to


avoid the asymmetric information problem.
avoid adverse selection problems.
 reduce moral hazar
 reduce transactions costs.
 improve symmetric information system
8. Typically, borrowers have superior information relative to lenders about the potential returns and
risks associated with an investment project. The difference in information is called





asymmetric information
moral selection
risk sharing
adverse hazard
Free-rider problem
9. Which of following explain why financial intermediation (banking) exists.





delegated monitoring
information production
liquidity transformation
consumption smoothing
all
10. Which mechanism has developed demand deposits to control banks' risk aversion because changes
in demand and demand for these instruments will be reflected in financing costs and these disciplines,
or have forced banks to exercise caution?





information production
commitment mechanisms
liquidity transformation
consumption smoothing
risk transformation
11. Lenders want





to maximize counterparty risks
to maximize a substantial searching cost
to achieve more liquidity
to give a fund for a long period of time
always large-size lending
12. Asymmetric information:





Everyone has the same level of information
Each party has a little information
A bank always know how likely borrower repay
A seller may hide the quality of a product from buyers
No one knows the price of a bank product
13. Direct finance:





Financial claims are created there
There is need for financial intermediaries
A bank is a type of it
Borrower and lender are not able to meet there
A type of indirect finance
14. One of them is wrong about transaction costs





Financial intermediaries may be transaction cost reduction
It is the cost of searching for a counterparty
It is the cost of obtaining information about a borrower
The cost per unit of transaction decreases for a borrower in financial markets
It is the cost of negotiating the contract between a lender and a borrower
15. The government regulates financial markets for three main reasons:

to improve control of monetary policy, to ensure that financial intermediaries earn a normal
rate of return, and to increase the information available to investors.
 to ensure that financial intermediaries do not earn more than the normal rate of return, to
ensure soundness of the financial system, and to improve control of monetary policy.
 to ensure soundness of the financial system, to improve control of monetary policy, and to
increase the information available to investors
 to ensure soundness of financial intermediaries, to increase the information available to
investors, and to prevent financial intermediaries from earning less than the normal rate of
return.
 all of the above
40. Which account is mainly for frequent business transactions?





Checking account
Time account
Pension account
Saving account
Eurobonds
41. Select correct answer about commercial banks.





cannot offer facilities for customers to make their payments
had competed freely before deregulation
requires a contract which specifies the amount and frequency of the flow of funds
cannot develop by process innovation
depositors are free to decide the frequency and amount of their transactions
42. Select a type of plastic cards.





Cheques paper
Debit cards
Investment products
Standing orders
Commercial paper
43. Bank earns interest on





Deposit
Deposit and loan
Loan
Commisions
Borrowing from the other banks
44. _________includes reloadable electronic money instruments in the form of stored value cards and
electronic tokens stored in computer memory.





Remote payments
E-finance
Internet banking
E-money
E-commerce
45. _______________that involve depositing funds for a set period of time for a pre-determined or
variable rate of interest.





Current account
Time or savings deposits
Transaction account
Checking account
Money market account
105. In Islamic banking the basic rules governing the Musharakah contract is:
 an arrangement where a bank and a borrower establish a joint commercial enterprise and both
contribute capital as well as labour and management as a general rule
 relate to a bank underwriting the obligations of a third party and thereby assuming the risk of
the transaction.
 to provide their corporate clients with asset management services, not only to manage a
company’s own investments but also to manage the pension funds of the firm’s employees.
 Traditional foreign and Eurocurrency banking
 aim to offer clients a spectrum of products and services that strengthen customer relationships
and provide services that client’s valu
106. Foreign exchange and interest rate services offered to large (multinational) corporate clients
include the:





securities underwriting, syndicated lending, , currency options and interest rate options
euro notes, index futures, currency futures, currency options and interest rate options
euro notes, index futures, currency futures, currency options and interest rate options
currency futures, currency options, interest rate options, interest rate and currency swaps
repurchase agreements, forward commitment, currency options and interest rate swaps
107. Which of the following is false regarding community banks?





They typically operate in a limited geographic area.
They often focus on lending to small businesses.
They typically have extensive operations in specific regions of the country.
The bulk of their funding comes from deposits.
They tend to grow at a modest rate.
108. In a ________ banking system, commercial banks provide a full range of banking, securities, and
insurance services, all within a single legal entity
 universal
 severable
 barrier-free


dividerless
dual
109. __________ have a large international presence.





Nationwide banks
Super regional banks
Regional banks
Global banks
Specialty Banks
144. Balance Sheet of the Alfa Bank
Assets
Reserves $200,000
Loans 60,000
Securities 140,000
Property 100,000
Liabilities
Deposits $400,000
Borrowings
from other banks 100,000
If the required reserve ratio is 10%, Alfa Bank excess reserve will be:





$40,000
$160,000
$80,000
$120,000
$200,000
170. Bank has $80 million in checkable deposits, $18 million in deposits with the Central Bank, $8 million
cash in the bank vault and $5 million in government bonds. Given this information Bank has liabilities o





$98 million.
$85 million.
$105 million
$120 million
$80 million
171. If a bank has deposits of $100,000, loans of $75,000, cash on hand of $10,000, and $12,000 on
deposit at the Central Bank, then its reserve ratio is:





12%.
0,1
0,09
0,05
0,15
200. ABC Bank has posted the following financial statement entries:Interest revenues $63
millionInterest costs $42 million Total earning assets $700 million. What is the bank's net interest
margin?





5%.
0,01
0,03
0,02
0,04