Asset-backed Securities, Loan Sales, and Derivatives — Test Answers

The Black-Scholes model was developed in 1973 and is still used today to figure out a fair price for _____.

A standby letter of credit can be traded on some markets.

A bank's asset quality is mainly monitored by _____.

The Term Auction Facility can best be described as _____.

Frank usually has less than $500 in his bank account. Banks typically do not care for these low-balance depositors.

Bank B’s short-term liquidity is represented by S. Its short term obligations/liabilities are represented by x. To find the bank’s total cash or near cash assets, _____.

The Federal Reserve is responsible for setting our monetary policy. Name two other important functions of the Fed.

A Wall Street firm that failed in 2008 and is no longer in business in any form is _____.

Explain one important event that caused the most recent change in Basel norms, in 2010.

Explain how two federal agencies did not do their job and contributed to the housing collapse of 2007.

A Wall Street firm with a strong asset statement is receiving funds from the Treasury. This payment is most likely _____.

The U.S. government still owns part of the AIG insurance company.

The federal government's TARP program was designed to buy banks' mortgage backed securities. According to the plan, this would result in _____. (Select all that apply.)

Terry is analyzing the common equity on his company's financial statement. This means he is looking at the company's _____.

Explain the concept of “too big to fail” and discuss how was this myth busted? [150 minimum word count]

Bank tellers are in high demand as the number of banks increases.

A bank is preparing a financial asset for trading in the over-the-counter market. It most nearly sounds as though they are _____.

Even though a bank has sold a loan portfolio it will continue to receive a fee or percentage of the loans’ interest payments.

One bank sells its loan portfolios and another bank securitizes its loan assets. Both are essentially doing the same thing, although one takes longer than the other.

Match each term related to bank loans to its description in Column B.