1. The three pillars of Basel II address operational risk through a)Additional r
ID: 2751533 • Letter: 1
Question
1. The three pillars of Basel II address operational risk through
a)Additional regulatory capital requirements
b)additional supervisory scrutiny of management and capital charges
c)techniques used to calculate operational risk
d)all of the above
2. Portfolio theory states that _______ and risk and return theory states that _______.
a) investors can earn abnormal returns if they take on high risks, unsystematic risk can be reduced by diversification.
b) investors should be adequately compensated for the risks that they take on, unsystematic risk can be reduced by diversification
c) investors should be adequately compensated for the risks that they take on, systematic risk can be reduced by diversification
d) all of the above
e) 1 and 2.
3. Which of the following financial institutions are exempt from federal income tax?
a) savings banks
b) S&Ls
c) credit unions
d) commercial banks
e) none of the above
4. Thrifts have a greater liquidity problems relative to CUs and banks, because
a) liabilities are highly liquid, while assets are highly illiquid.
b) liabilities are highly illiquid, while assets are highly liquid.
c) SAIF restrictions do not allow for short-term cash management options available to commercial banks
d) none of the above
5. Credit risk is
a) is an internal event such as the improper valuation of a loan applicants default risk that causes fluctuations in net income.
b) can be reduced through loan portfolio diversification
c) is an external event; the default of a borrower that causes fluctuations in net income
d) none of the above
e) 2 and 3
6. Which type of financial institution has the highest interest-rate risk, on average, of all depositories?
a) Banks
b) Credit unions
c) Investment banks
d) thrifts
7. Savings banks and S&Ls differ primarily because
a) savings banks are not restricted from investing in corporate stock
b) S&Ls place greater emphasis on commercial savings deposits
c) savings banks place greater emphasis on home loans
d) S&Ls place greater emphasis on home loans
e) 1 and 4
Explanation / Answer
1.The three pillars of Basel II address operational risk through
Answer : d) all of the above
2.Portfolio theory states that _______ and risk and return theory states that _______
Answer : e) 1 and 2
3.Which of the following financial institutions are exempt from federal income tax?
Answer : c) credit unions
4.Thrifts have a greater liquidity problems relative to CUs and banks, because
Answer : a) liabilities are highly liquid, while assets are highly illiquid.
5. Credit risk is
Answer : e) 2 and 3
6. Which type of financial institution has the highest interest-rate risk, on average, of all depositories?
Answer : c)Investment banks
7.Savings banks and S&Ls differ primarily because
Answer : e) 1 and 4
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