These study guide questions and problems are designed to help you in preparation for quizzes/exams
in Commercial Bank Management based on the course objectives. 

Chapter 1: Functions and Forms of Banking

1. Equity capital is a bank's major source of  funds?  

     (a) True    (b) False

2. Securitization refers to the process of making some of the loan portfolio marketable by

   establishing pools of loans and selling interests (i.e. securities) in the pool. 

    (a) True   (b) False

3. Which of the following is NOT a function of commercial banks? 

    (a) financial intermediation   (b) payments  (c) declined consideration  (d) real estate related activities

4. Commercial Banks do not engage in which of the following securities related services?

   (a) discount brokerage services  (b) underwriting corporate stocks and bonds 

   (c) underwriting U.S. Treasury securities  (d) facilitating mergers and acquisitions

5. The largest use of funds for a commercial bank is: (a) savings deposits  (b) loans 

    (c) time deposits  (d) securities  

6. Which of the following is an example of fraud (defalcation) risk? 

   (a) a bank officer falsifying records  (b) a customer writes several bad checks and leaves town

   (c) a depositor fails to report a clerical error in his favor  (d) all of these 

7. The social constraints imposed on banks are:  (a) exemplified in CRA

   (b) due to the historical position of the bank as the core of the financial system

   (c) regulated by the federal reserve bank  (d) regulated by the FDIC

   (e) regulated by the FSLIC

8. Globalization of the financial system involves:  (a) the expanding number of services offered by banks

   (b) the increasing links between U.S. and foreign markets  (c) the increasing competition in the U.S. among 

   domestic banks   (d) only b and c

9. Profitability _____ in the banking industry, while the number of bank failures ____in the 1990s.

  (a) declined; stabilized   (b) increased; declined  (c) declined; increased  (d) declined; declined 

Chapter 1: Answers

1. False  2. False  3. C  4. B  5. B 6. A  7. A  8. B  9. B

Chapter 2: Bank Regulations and the Financial Environment

1. The FDIC was created in the early 1930's in order to reduce the number of bank failures.

    (a) True   (b) False

2. High loan-to-value ratios increase a  bank's credit risk. 

    (a) True   (b) False 

3. Among the features of the Banking Act of 1933 were the following: 

   (a) the separation of commercial investment banking (b) the creation of the FDIC 

   (c) the prohibition of payment of interest on demand deposits 

   (d) all of the above 

4. Which of the following is NOT part of a bank's CAMEL rating? 

     (a) the amount of capital  (b) the quality of management  (c) the level of liquidity

    (d) the number of shareholders  (e) the level of earnings

5. Among the restrictions that were placed on banks by the 1933 and 1935 Banking Acts

    are:  (a) restrictions on pricing of deposits  (b) restrictions on entry and expansion of bank services

   (c) restrictions on the scope and nature of activities, especially limitations on securities power

   (d) only a and c  (e) a, b, and c

Chapter 1: An Overview of Flow Management
Conceptual Questions: 21, 22, 24, 25, 26

Chapter 2: Analysis of Financial Statements
Self- Test Questions: 1,2,4,5, 10, 11, 12, 13, 14, 16, 17,22
Conceptual Questions: 37
Self Test Problems: I to 3, 5, 7, 12, 13

Chapter 3: Analysis of Financial Statements
Self Test Questions: Ito 4, 7, 8, 12, 16, 17
Conceptual Questions: 27, 29, 30

Chapter 14: Long Term Financing Planning
Self Test Questions: ito 4, 8, 19, 21
Conceptual Questions: 25, 29
Self Test Problems: 1 to 4

Chapter 4: The Financial Environment
Self Test Questions 1 to 5, 7, 10, 12, 20, 26
Conceptual Questions: 27, 30
Self Test Problems ito 4

Chapter 5: Risks and Return - Basics 1
Self Test Questions: 1, 3, 9 to 11, 13, 22
Conceptual Questions: 23, 25
Self Test Problems: 1, 2, 3, 4, 6

Chapter 6: Risk and Return - Extensions
Self Test Questions: 1, 4, 7, 9
Conceptual Questions: 24, 25
Self Test Problems: 1 to 3, 4, 5, 6

Chapter 7: Valuation Models
Self Test Questions: 1,4-7, 8, 11, 12, 14
Conceptual Questions: 15, 17, 18
Self Test Problems: 1,2,4,5-7, 11-14, 17, 20, 21

Chapter 27: Multinational Financial Management
Self Test Questions: 1, 4, 10
Conceptual Questions: 27, 28
Self Test Problems: 1, 2, 5

Chapter 8: Bond Valuation
Self Test Questions:1, 3-5, 7-8, 10-11, 14, 16
Dr. A Frank Thompson Fall 2000
Page 7.
Study Guide Questions and Problems

Conceptual Questions: 30, 32, 33
Self Test Problems: 1-4, 6, 7

Chapter 9: Stock Valuation
Self Test Questions: 1-2, 5-6, 8, 10, 17, 26
Conceptual Questions: 32, 33
Self Test Problems: 1-4

Chapter 10: Cost of Capital
Self Test Questions: 1, 4, 7-8, 12, 25
Conceptual Questions: 28
Self Test Problems 1, 2, 5-7, 10-12

Chapter 11: Capital Budgeting Basics
Self test Questions: 1, 2, 4-8, 11-13, 17, 22, 25
Conceptual Questions: 31, 32, 35
Self Test Problems: 1-13

Chapter 12: Cash Flow Estimation
Self Test Questions: 1, 2, 4, 7, 9
Conceptual Questions: 21, 22
Self Test Problems: 1, 2, 4-6

Chapter 21: Current Asset Management
Self Test Questions: 1-3, 5-8, 11, 1.3, 16, 21, 24
Conceptual Questions: 35, 36, 40
Self Test Problems: 1, 2, 3, 5, 6, 7,

Chapter 22: Short Term Financing
Self Test Questions: 1,7-8, 12-13,15,16,19,30
Conceptual Questions: 31,33
Self Test Problems: 1,2,3,5,6,7