Banking Exam Banking Investment and Capital Markets 2

Question 1

What is a Treasury bill (T-bill)?

Accepted Answer

A short-term US government debt security maturing in one year or less

Answer

A long-term corporate bond issued by Fortune 500 companies

Answer

A savings account offered by the US Treasury Department

Answer

A municipal bond issued by state governments

Question 2

What does the term 'yield curve' refer to in banking?

Accepted Answer

A chart plotting interest rates of bonds with equal credit quality but different maturity dates

Answer

A graph showing a bank's profitability over time

Answer

A measure of how quickly loans default

Answer

A diagram of a bank's organizational hierarchy

Question 3

In securities trading, what is a 'short sale'?

Accepted Answer

Borrowing securities and selling them, hoping to repurchase at a lower price later

Answer

Selling securities at below their fair market value

Answer

Selling bonds before their maturity date

Answer

A quick sale executed within the same trading day

Question 4

What is a mutual fund?

Accepted Answer

A pooled investment vehicle managed by a professional that invests in a diversified portfolio

Answer

A checking account shared between two or more individuals

Answer

A savings account insured by the FDIC

Answer

A type of mortgage loan offered to multiple borrowers

Question 5

What is the difference between the primary market and the secondary market?

Accepted Answer

The primary market is where new securities are issued; the secondary market is where existing securities are traded between investors

Answer

The primary market trades stocks; the secondary market trades bonds

Answer

The primary market is regulated by the Fed; the secondary market by the SEC

Answer

The primary market is for institutional investors only; the secondary market is for retail investors

Question 6

What is a derivative financial instrument?

Accepted Answer

A financial contract whose value is derived from the performance of an underlying asset

Answer

A government bond derived from tax revenues

Answer

A bank account that earns interest derived from stock dividends

Answer

A loan product based on a borrower's credit score