1.

The financial intermediaries that the average person interacts with most
frequently are
√ banks
• finance companies
• exchanges
• Insurance companies
• over-the-counter markets

2. Regulation of the financial system

• protects the wealth of owners of financial institutions.
• protects the wealth of owners of commercial banks.
• occurs only in the United States.
√ ensures the stability of the financial system.
• protects the jobs of employees of financial institutions.

3. Which of the following belong to maturity transformation in role of banks?

• Banks collect funds from savers in the form of small size deposits and
repackage them into larger-size loans
√ Banks transform funds lent for a short period of time into medium- and
long-term loans.
• Banks are able to minimize the risk of individual loans by diversifying their
investments, pooling risks, and monitoring borrowers unlike individual savers

• Extending the loan duration reduces the bank's risk, which in itself brings
more profit to the bank.
• Longer deposit periods reduce the bank's costs and allow it to lend at
higher interest rates.
4. Full-service banks that offer retail banking, commercial banking, and
investment banking services to any potential client
• Investment Banks
• Central Banks
√ Universal Banks
• Commercial Banks
• Retails Banks

5. Historically, a commercial bank was defined as a firm that:

• is regulated by the Federal Reserve.
√ accepted deposits and made loans.
• accepted NOW accounts and made consumer loans.
• accepted demand deposits and made consumer loans.
• accepted government deposits and made public loans.

6. _____________business consisted of taking deposits and making loans and

the majority of their income was derived from lending business.
• Modern banking
• Classic banking
• Investment banking
• International banking
√ Traditional banking
7. Which of the following components belongs to traditional banking?
√ asset size and growth
• all of above
• demand led
• commission fee
• universal products

8. Central banks can serve as a lender of last resort because:

• they are the only financial institution that is legally allowed to make loans
during a financial panic
• banks are more likely to borrow money from their depositors during a
financial panic
• because only the central bank has the opportunity to lend at lower interest
rates and in larger amounts
√ they have the ability to create money to stimulate banks
• the interest rates they charge are so high that banks are virtually never
willing to borrow from the central bank

9. Which of the following is not a fundamental function of the Central Bank?

• Acts as the official agent to the government in dealing with all its gold and
foreign exchange matters.
√ Provide credit to public
• Oversee the financial sector in order to prevent crises and act as a lender-
of-last-resort
• Provide an effective payments system.
• Conduct the nation’s monetary policy.
10. _________ is concerned with the actions taken by central banks to
influence the availability and cost of money and credit by controlling some
measure (or measures) of the money supply and/or the level and structure
of interest rates.
• Exchange rate policy
• Interest rate policy
• Fiscal policy
• Credit policy
√ Monetary policy

11. Which is not an open market operation?

• Purchasing and selling foreign exchange.
√ Making loans
• Central banks conduct auctions of reserves as repurchase agreements.
• Purchasing or selling government securities.
• none of the above

12. A borrower's interest rate can be determined using which of the following?
• loan terms
• credit amount
√ Credit score
• repayment schedules
• credit availability from bank
13. Mark borrowed money from the bank to buy a new car. A year later he lost
his job and has started to not be able to make his car payments. This
problem is known as what?
• interest
√ debt
• he did not know he have to pay anyway
• credit availability
• budget

14. The type of bank account in which the deposited amount cannot be
withdrawn before the maturity of the term is.
• Current bank account
• Nostro account
√ Time/fixed deposit account
• Transactional bank account
• MMDA deposit account

15. Why is opening a bank account a smart way to save money?

• You can cash checks without paying a fee to a currency exchange.
• You can make sure your money is safe from theft.
• None of the above
• You can earn interest on money you place in a savings account
√ All of the above,
16. Valuation of common stock
• Relative valuation or Asset-based valuation
√ Discounted cash flow valuation; Relative valuation; Asset-based valuation
• None of the above
• Discounted cash flow valuation or Asset-based valuation
• Discounted cash flow valuation only

17. Derivatives' value is based on

• Hedge funds
• Loan portfolio
• None of the above
• Portfolio of securities
√ Underlying asset

18. Futures are derivative financial contracts that

• Obligate the parties to transact an asset at a predetermined future date
and unspecified price
• None of the above
• Obligate the parties to transact an asset at an unspecified future date and
price
• Obligate the parties to transact an asset at an unspecified future date and
specified price
√ Obligate the parties to transact an asset at a predetermined future date
and price
19. Main causes of risk
√ All of the above
• Legal
• Financial
• Human
• Marketing/production

20. What are the key elements of risk management?

• risk measurement, risk reporting and monitoring; risk mitigation; risk
governance
• risk measurement, risk identification and assessment; risk mitigation; risk
governance
• risk identification and assessment; risk reporting and monitoring; risk
mitigation
√ risk measurement, risk identification and assessment; risk reporting and
monitoring; risk mitigation; risk governance
• risk measurement, risk identification and assessment; risk reporting and
monitoring; risk mitigation

21. Types of market risk

√ commodity risk, equity risk, interest rate risk, exchange rate risk
• interest rate risk, exchange rate risk
• commodity risk, exchange rate risk
• commodity risk, equity risk, interest rate risk
• commodity risk, interest rate risk
22. Choose the false statement regarding Basel 1, 2, 3 differences?
• Basel 2 introduced a 3 pillar approach to risk management.
• Basel 2 introduced a 3 pillar approach to risk management.
• Basel 1 was formed with the main objective of enumerating a minimum
capital requirement for banks.
√ Basel 1 considers only Credit risk, Market risk and Liquidity risk
• Basel 2 was established to introduce supervisory responsibilities and to
further strengthen the minimum capital requirement.

23. IRB approach for Credit risk under the Pillar 1 helps banks to _____
√ categorise loans in probability-to-default (PD) bands.
• to comply regulator requirements to manage their assets and liabilities
• predict customers future paymets
• protect shareholder' and stakeholders' interests
• to increase ROE and ROA coefficient

24. The capital charge calculation for the operational risk through the Basic
Indicator Approach (BIA) is follows
• Capital charge = (Positive income last two years / 2)x 17%
• Capital charge = (Positive income last five years / 5)x 20%
• Capital charge = Positive income last x 15%
√ Capital charge = (Positive income last three years / 3)x 15%
• Capital charge = (Positive income last two years / 3)x 15%
25. Basel II - Pillar 3 – Disclosure means
• Prudentiality must be the core of the bank operation policy
• Banks strictly required comply with the customer data protection
√ Banks need to meet disclosure requirements regarding capital, capital
adequacy, risk exposure
• Banks need to take care of shareholders and stakeholders interests
• Banks need to comply with regulator requirements

26. What are the main functions of the AML desk in the bank?
• Diversify bank's market risk level through the different derivative
instruments
• Create efficient security portfolio
• Manage interest-rate risk and credit risk.
• Increase exchange incomes of the bank
√ Manage interest-rate risk and liquidity risk.

27. Liguidity GAP is definied as

• the risk of llosing stand by credit lines
• the uneffective use of cash flows to meet the banks liquidity needs
• the lack of the ability easily convert an asset or security into the cash.
• to match the terms of the liabilities with the terms of the assets
√ the mismatch between the different terms of assets and liabilities across
the term structure;
28. Interest rate GAP is definied as
• the potential for investment losses that result from a change in interest
rates.
√ the mismatch between the different interest rates that each asset or
liability contract has been struck at.
• compares rate-sensitive assets with rate-sensitive liabilities across 7-14
days, and 30-90 days time buckets
• Manage banks assets and liabilities on a strategic level
• Keeping all interest rates constant

29. Liquidity is the ability to:

• Avoid a significant capital loss during the selling bank assets
• Finance banks short term projects
• Receive a return on high risky assets
√ quickly raise cash by selling investments
• Sell assets to meet liquidity needs

30. If a bank has a positive GAP and bank continues attached deposits it will
cause
√ inefficiency in liquidity management
• increase liquidity risk
• none of them
• decrease banks capital adequacy
• increase bank short term income
31. Asset Liability Committee (ALCO) directly work with ________ department
to manage banks asset and liabilities
• Finance Department
• Risk Management department
• Setllement department
• Credit department
√ Treasure department

32. Loan commitments ________ which have to be strictly taken into account
during asset liability management process
• compensation expressed as a percentage of the total commitment and paid
up front by the borrower
• a document issued by a bank stating its commitment to pay someone a
specific amount of money on behalf of a buyer
√ are promises to lend up to a pre-specified amount to a pre-specified
customer at pre-specified terms.
• Loan portfolio with high reserves
• Mortgage loan portfolio

33. The possibility of future change in price with a consequent of loss of return
results in:
• Liquidity risk
• Systematic risk
• Default risk
• Credit risk
√ Market risk
34. Non-performing loans are loans that are past due _____ that are not
accruing interest.
• 30 days
√ 90 days
• 180 days
• more than one year
• 75 days

35. Which of these function are "NOT" a part of risk process.

• Assessment of risks
• Reporting
• Identification of risks
• Monitoring of risks
√ Generating Profit

36. BASEL-III introduced ________ to cover short-term liquidity stress in banks?

• Capital conservation buffer
√ Liquidity Coverage Ratio (LCR)
• Risk weighted assets
• Net Stable Funding Ratio (NSFR)
• Countercyclical buffer
37. Main objective of implementing BASEL-III is:
• To strengthen banks' transparency and disclosures
• To minimize the probability of recurrence of crises to greater extent
√ All of the above
• To improve the banking sector's ability to absorb shocks arising from
financial and economic stress.
• To improve risk management and governance.

38. Which of the three Pillars are covered by Basel III capital regulation based
on? 1. Minimum capital requirements 2. Supervisory review of capital
adequacy 3. Management Control 4. Credit risk management 5. Market
discipline
• 1,2,3
√ 1,2,5
• 1,3,4
• 2,4,5
• 1,4,5

39. A typical balance sheet composition

• Assets = Liabilities - Equity
• Assets = Liabilities - Loans from the Central Bank
√ Assets = Liabilities + Equity
• Assets + Equity = Liabilities
• Assets = Liabilities
40. Return on Assets (ROA) is
• gross profit/total assets
• gross profit/total assets - loans to customers
• None of the above
√ net profit/total assets
• net profit/total assets - loans to customers

41. Efficiency Ratios is calculated as

√ Non-Interest Expense / Revenue
• Interest Expense - Provisions / Revenue
• Non-Interest Expense - Provisions / Revenue
• None of the above
• Interest Expense / Revenue

42. Depository financial institutions include all of the following EXCEPT

• savings banks.
√ shadow banks.
• credit unions.
• all of the above are depository institutions.
• commercial banks..
43. The most diversified type of depository institutions is
• savings associations
• credit unions.
• finance companies.
• mutual funds.
√ commercial banks.

44. The ability to print money means the central bank can control:
√ The availability of money and credit in a country's economy.
• The unemployment rate
• Tax revenues
• Government expenditures
• The availability of deposit in a country’s economy

45. What may NOT impact the interest rate on your loans?
• Time maturity
√ Your level of education
• Your credit score
• Your relationship with the financial institution
• The loan amount
46. When there is a financial loss to bank arising from legal suits filed against
the bank or by bank for wrongly applying regulation, it is called
• Market risk
• Asset rsik
• Systematic risk
√ Legal risk
• Capital risk

47. What is the relationship between the interest rate an account pays you and
the minimum balance it requires?
• An account with no minimum balance will pay the highest rates.
• There is no connection at all.
• The lower the minimum balance the higher the interest rate.
• The higher the minimum balance the lower the interest rate.
√ The higher the minimum balance the higher the interest rate.

48. What is not a competitive advantages that traditional banks have over Neo
Banks
• Large data sets
• Large customer bases
√ Innovative environment
• none of them
• Customer Trust
49. -Simplicity -Transparency -Ease of customer acquisition -Ease of distribution
and commercial attractiveness -Specialization
• Difference between credit & debit card
• Main goal behind segmentation practice
• Benefits of credit cards for customers
• Advantages of transferable letter of credit
√ Main business characteristics of neo banking

50. As we all know, more and more countries/ organisations are now going for
non- cash transactions and accordingly banks have launched many new
products in the market for the same. Which of the following products is a
non-cash transaction product?
• a debit card
• a prepaid card
• cryptowallet
√ All of them
• a credit card