Deck 5: The Performance of Nontraditional Banking Companies

Question 1

Under FASB 157, Level _______ assets valuation are based on observable market prices for similar assets or liabilities.

A) 1
B) 2
C) 3
D) 4
E) 5

Answer 1

B

Question 2

A __________ is an investment fund that is limited to a small number of sophisticated investors.

A) money market mutual fund
B) private equity fund
C) risk management fund
D) hedge fund
E) market development fund

Answer 2

D

Question 3

Investment banks generally engage in all of the following types of business activities except:

A) proprietary trading.
B) goodwill recovery.
C) market making.
D) securities underwriting.
E) advisory services

Answer 3

goodwill recovery.

Question 4

Under FASB 157, the valuation of Level 2 assets is labeled:

A) marking to market.
B) marking to matrix.
C) marking to myth.
D) marking to major.
E) marking to minor.

Question 5

Under FASB 157, the valuation of Level 1 assets is labeled:

A) marking to market.
B) marking to matrix.
C) marking to myth.
D) marking to major.
E) marking to minor.

Question 6

Goldman Group listed all of the following key risk faced by the firm in its 2007 annual report except:

A) widening credit spreads..
B) an increase in the number of securities underwritings.
C) declines in equity values.
D) declines in the number of mergers and acquisitions.
E) an increase in market volatility.

Question 7

If a security is a first-time placement for a firm, it is called a(n):

A) initial public offering.
B) first time equity offering.
C) primary offering.
D) secondary offering.
E) seasoned offering.

Question 8

______________ represent amounts owed to Goldman Group by brokers, the firm's customers, and counter-parties to derivative contracts.

A) Collateralized agreements
B) Financial instruments
C) Collateralized financings
D) Receivables
E) Payables

Question 9

The underwriting process involves all of the following except:

A) helping a firm design a security to meet all legal requirements.
B) identifying potential buyers.
C) pricing the security.
D) selling the security to the market place.
E) All of the above are part of the underwriting process.

Question 10

During the underwriting process, the investment bank receives payment for all of the following except:

A) flotation costs.
B) legal costs.
C) Federal Reserve costs.
D) accounting costs.
E) marketing costs.

Question 11

Under FASB 157, Level _______ assets valuation are based on management's best judgment of what the underlying asset is worth.

A) 1
B) 2
C) 3
D) 4
E) 5

Question 12

On Goldman Groups' 2012 balance sheet, ___________ consist of securities that Goldman Sachs has loaned under an agreement to repurchase at a later date.

A) collateralized agreements
B) financial instruments
C) collateralized financings
D) receivables
E) payables

Question 13

If a firm already has stock outstanding that is publically traded, additional offerings are called:

A) initial public offering.
B) second time equity offering.
C) primary offering.
D) secondary offering.
E) flavored offering.

Question 14

Under FASB 157, Level _______ assets valuation are based on observable market prices for the identical instrument.

A) 1
B) 2
C) 3
D) 4
E) 5

Question 15

______________ represent amounts owed by Goldman Group to brokers, the firm's customers, and counter-parties to derivative contracts.

A) Collateralized agreements
B) Financial instruments
C) Collateralized financings
D) Receivables
E) Payables

Question 16

When an investment bank commits its own funds to take a risk position in an underlying security, it is known as:

A) underwriting.
B) market making.
C) proprietary trading.
D) organizing a market.
E) brokering.

Question 17

Under FASB 157, the valuation of Level 3 assets is labeled:

A) marking to market.
B) marking to matrix.
C) marking to myth.
D) marking to major.
E) marking to minor.

Question 18

When an investment bank stands willing to buy securities from participants who want to sell and to sell securities to participants who want to buy, it is:

A) underwriting.
B) market making.
C) principal investing.
D) proprietary trading.
E) organizing a market.

Question 19

Which of the following investment banking services would be classified as an advisory services?

A) Managing investments for governments.
B) Designing an initial public offering
C) Acting as a broker that facilitates security trading
D) Running a hedge fund
E) Proprietary trading

Question 20

Mutual of Omaha bank is charted as a:
F) commercial bank.
G) consumer bank. h. mutual savings bank.
I) thrift.
J) credit union.

Question 21

Investment banks are prohibited from making a market in the stock of publically traded companies.

Question 22

Net interest income made up a significant portion of Goldman Groups' net revenue in 2012.

Question 23

Mortgage origination makes up the largest portion of Goldman Groups' business.

Question 24

BMW Financial Services is owned by BMW Bank.

Question 25

Mutual of Omaha's business model is to combine insurance and banking activities.

Question 26

When an investment bank acts as a broker, it does not take ownership of the underlying security.

Question 27

Explain how Mutual of Omaha Bank "fits into" Mutual of Omaha's business model.

Question 28

Today, most industrial loan companies are located in Florida.

Question 29

Discuss the four types of businesses that investment banks traditionally engage in.

Question 30

BMW Bank is chartered by the:

A) state of Utah.
B) FDIC.
C) Federal Reserve.
D) Office of the Comptroller of the Currency.
E) National Credit Union Administration.

Question 31

"Hot money" represents Goldman Groups' greatest credit risk.

Question 32

Goldman Group has converted from an investment bank to a bank holding company.

Question 33

BMW bank has more financial leverage than its peers.

Question 34

Discuss why community banks might oppose Wal-Mart from being granted a charter for an industrial loan company.

Question 35

Historically, most industrial loan companies have operated to:

A) accept deposits.
B) assist their parent company in some facet of the firm's core business.
C) exclusively make commercial loans.
D) increase the safety and soundness of the parent company.
E) purchase municipal securities.

Question 36

Discuss the risks faced by Goldman Group.

Question 37

Discuss the benefits to BMW North America of owning BMW Bank.