Question 1

Federal Reserve Board has:

Accepted Answer

The Federal Reserve Board is responsible for monetary policy, regulatory responsibilities, and supervisory responsibilities, making "All of these" the correct choice.

Question 2

Which statement is correct concerning commercial letters of credit?

Accepted Answer

The answer of Which statement is correct concerning commercial letters...

Question 3

Correspondent banks, Credit party, Draw down, Execution date, Remitter, and Repetitive transfer are some terminologies related to:

Accepted Answer

These terms are primarily associated with bank wire transfers, which involve correspondent banks, remitters, and execution dates.

Question 4

Office of the comptroller of the currency:

Accepted Answer

The Office of the Comptroller of the Currency (OCC) is responsible for ensuring the safety and soundness of the national banking system, fostering competition by allowing banks to offer new products and services, and improving the efficiency and effectiveness of OCC supervision, including reducing regulatory burden.

Question 5

Banks provide the following personal trust services for individuals EXCEPT:

Accepted Answer

Banks typically offer all the listed services as part of their personal trust services for individuals.

Question 6

Asset/Liability (ALM) is a short and long term planning tool designed to maximize earnings. ALM tries to create optimal risk/reward decisions and focuses on creating prices that achieve spread. A sound ALM policy must manage following types of risks EXCEPT:

Accepted Answer

Control Risk is not typically managed by ALM policies, which focus on financial risks like credit, liquidity, and capital risks.

Question 7

Which of the following would not generally be a responsibility of an underwriting department?

Accepted Answer

The underwriting department is primarily responsible for assessing risk and determining the terms of insurance coverage, not for customer service tasks like helping policy owners with requests for information or interpreting policy language.

Question 8

___________ supervise domestic and international activities of national banks and perform corporate analysis.

Accepted Answer

National bank Examiners are responsible for supervising domestic and international activities of national banks and performing corporate analysis.

Question 9

When one party trades a variable interest rate for a fixed interest rate or vice versa then __________ occurs.

Accepted Answer

Interest rate swap occurs when one party trades a variable interest rate for a fixed interest rate or vice versa.

Question 10

Notes are debt instruments issued to:

Accepted Answer

Notes are typically issued to a single investor, who may be an individual or an entity, as a form of debt instrument.

Question 11

A sound Asset/Liability management policy must manage following risk EXCEPT:

Accepted Answer

A sound Asset/Liability management policy must manage Credit Risk, Capital Risk, and Interest-Rate risk.

Question 12

There may be instances of massive losses, in case of derivatives, most notably by __________________, these have not had repercussions.

Accepted Answer

Long-Term Capital Management (LTCM) was a hedge fund that experienced massive losses in the late 1990s due to its derivatives trading strategies, which nearly led to a financial crisis.

Question 13

All the activities, mentioned below, cause rise in interest rate EXCEPT:

Accepted Answer

When government prints money, it increases the money supply, which can lead to inflation. Inflation is a general increase in prices and fall in the purchasing value of money. When inflation is high, the central bank may raise interest rates to try to slow down inflation. However, printing money does not directly cause an increase in interest rates.

Question 14

Banks also serves as "registrar" for stocks and bond issues. The registrar accounts for all shares issued, certificates outstanding, and Certificates cancelled. The role/s of the registrar is/are:

Accepted Answer

The registrar's role includes ensuring that the transfer agent does not issue too many shares, that old certificates are properly cancelled, and that new certificates are issued in the correct numerical sequence.

Question 15

____________ is an electronic payment network used by individuals businesses, financial institutions and government organizations. It provide better cash management capabilities and lower costs than traditional paper payments.

Accepted Answer

ACH (Automated Clearing House) is an electronic payment network that facilitates transactions for individuals, businesses, financial institutions, and government organizations, offering better cash management and lower costs compared to traditional paper payments.

Question 16

The "discount on bonds payable" account is __________when a bound sells at discount. The "premium on bond payable" is ____________ when a bond sells a premium.

Accepted Answer

When a bond is sold at a discount, the "discount on bonds payable" account is debited to reflect the reduction in the bond's carrying value. Conversely, when a bond is sold at a premium, the "premium on bonds payable" account is credited to reflect the increase in the bond's carrying value.

Question 17

____________ is a form of insurance, to move risk from someone major loss to someone who could absorb the loss, or is able to hedge against the risk by buying some other derivative.

Accepted Answer

Derivatives, including futures, options, and swaps, are financial instruments used to transfer risk from one party to another, allowing the risk to be absorbed or hedged.

Question 18

The primary regulatory entities of banking industry include:

Accepted Answer

All of these entities are primary regulators in the banking industry, overseeing different aspects of banking operations and ensuring financial stability.

Question 19

Commercial banks create money by:

Accepted Answer

Commercial banks create money by making loans, as this process increases the money supply through the creation of new deposits in the banking system.

Question 20

CAMEL is an acronym that comes from the key areas of a financial institution's safety and soundness examination. It stands for:

Accepted Answer

CAMEL stands for Capital adequacy, Asset Quality, Management, Earnings, and Liquidity, which are the key areas assessed in a financial institution's safety and soundness examination.

Exam 1: Certified Financial Services Auditor