Chapter 14 Reviewer primarily due to what segment of the

finance company industry?

1. In 2016, credit union’s largest portion
a. Business factoring
of investment securities was ____.
b. Equipment loans
a. Treasury debt
c. Equipment leasing
b. Corporate bonds
d. Securitization of auto loans
c. Federal agency securities
e. Subprime lending
d. Mortgage-backed securities
7. For the finance company industry as
e. Asset-backed securities
a whole, the largest single loan type
2. In 2016, credit union’s biggest type of
is
loans was ___
a. Business loans
a. Mortgages
b. Consumer loans
b. Business Loans
c. Real estate loans
c. Consumer Loans
d. High-risk consumer loans
d. Home Equity Loans
e. Credit card loans
e. Government Loans
8. Home equity loans are popular with
3. Which one of the following institutions
finance companies. Which one of the
is the least regulated?
following statements about home
a. Banks
equity loan is not correct?
b. Credit Unions
a. These loans allow customers to
c. Finance Companies
borrow on a line of credit secured
d. Savings Associations
with a second mortgage
e. Savings Banks
b. Interest payments on home equity
4. Finance Companies obtain a
are not tax deductible
significant portion of their short-term
c. Bad debts expenses on home
financing from
equity loans are lower than on
a. Time and Savings deposits
many other types of finance
b. Transaction Accounts
company loans
c. Long-term bonds
d. In 2007-2008 there was a sharp
d. Issuing commercial paper
increase in defaults among home
e. Equity
equity borrowers
5. Which one of the following utilizes the
e. If the borrower defaults on the
least amount of deposits as a source
home equity loan, the finance
of funds?
company can seize the house
a. Banks
9. A loan agreement between Ford
b. Credit Unions
Motor Credit and a local Ford dealer
c. Finance Companies
is an example of
d. Savings Associations
a. Floor plan financing
e. Savings Banks
b. Business equipment loan
6. Aggregate finance company
c. Factoring of receivables
profitability was poor in the late 2000s
 d. Depreciation loan b. Specialize in making installments
e. None of these options are correct and other loans to whatever
10. A captive finance company is one that consumers are interested
a. Is owned by a retailer or c. Specialize in providing loans to
manufacturer businesses
b. Is owned by a bank holding d. Specialize in international
company factoring and forfeiting
c. Is owned by its depositors e. None of these options are correct
d. Lends only to high-risk individuals 14. Factoring is
that cannot obtain loans a. Equipment leasing
elsewhere (i.e. captives) b. Servicing mortgage factors
e. Is regulated at the federal level c. Purchasing corporate accounts
11. Finance companies enjoy several receivables at a discount
advantages over banks. These d. Financing automobile purchases
include all but which one of the e. Making installment loans to
following? (not) customers
a. Finance companies can offer 15. In 2016, _____ had on average the
various types of products and greatest amount of equity as a
services without regulatory percentage of assets and ____ had
b. Many finance companies have the lowest
considerable knowledge and a. Savings institutions; credit unions
expertise about specific industry b. Banks; credit unions
and products c. Credit unions; finance companies
c. Finance companies can accept d. Finance companies; credit unions
riskier customers than banks e. Finance companies; banks
d. Finance companies generally 16. Rank the following from greatest to
have lower overhead than banks smallest in terms of industry asset
e. Finance companies have lower size in 2016.
funds costs than banks I. Banks
12. A finance company that makes loans II. Savings institutions
to high-risk customers is called a III. Credit unions
a. Subprime lender IV. Finance companies
b. Commercial bank a. IV, I, II, III
c. Factor b. I, IV, III, II
d. Warehouse lender c. I, II, IV, III
e. Credit lender d. I, II, III, IV
13. Sales finance companies e. II, IV, III, I
a. Specialize in making loans to 17. SI profitability declined in the mid-
customers of a specific retailer or 2000s due to
manufacturer
 I. The yield curve becoming 20. The U.S. Credit Card Union and the
more positively sloped corporate credit union
II. Decreases in the NIM ratio a. Are the primary regulators of the
III. Increases in the NIM ratio credit union industry
IV. The yield curve becoming b. Provide investment and liquidity
flatter and even inverted services to corporate credit unions
a. I and II only c. Serves as the trade organization
b. II and III only for the industry
c. II and IV only d. Charter credit unions
d. III and IV only e. Provide deposit insurance for
e. I and III only credit unions
18. As a percentage of total assets, credit 21. Credit unions are
unions invest ____ in securities than I. Mutual associations
institutions and ____ in consumer II. Not open to the general public
loans than commercial banks III. For profit institutions
a. More; more a. I only
b. Less; less b. II only
c. More; less c. I and II only
d. Less; more d. I, II and III
e. Less; about the same e. II and III only
19. Credit unions have several 22. ____ are the most diversified of
advantages over banks. These depository and ____ are on average
include the following largest depository institutions
I. Credit unions are not taxed a. Banks; savings institutions
II. Credit unions are better b. Credit unions; commercial banks
diversified than banks c. Credit unions; credit unions
III. Credit unions can collectively d. Commercial banks; commercial
pool funds banks
IV. Due to regulations, credit e. Savings institutions; commercial
unions have better economies banks
of scale and scope than banks 23. Deposits at savings banks are backed
V. Because of their ties to by the ____ and deposits at savings
employees, credit unions have institutions are backed by the ____
better personnel expertise a. BIF; BIF
than b. BIF; SAIF
a. I and II only c. SAIF; BIF
b. I and III only d. SAIF; SAIF
c. III and IV only e. DIF; DIF
d. III, IV, and V only 24. Historically, most savings institutions
e. I, III, and V only were established as
 a. Mutual organizations 29. The OTL test requires that thrifts
b. Stockholder organizations a. Limit the amount of mortgage-
c. Partnerships related assets on the balance
d. Charitable organizations sheet to improve diversification
e. Banks b. Invest in a minimum percentage of
25. The predominant liabilities for savings government-backed securities to
institutions are protect their mortgage loans
a. Commercial deposits and FHLB c. Lend no more than 80 percent of
borrowings the value of a home to a borrower
b. Wholesale money market notes to ensure mortgage safety
and reserves at the Fed d. Keep 35 percent of their assets in
c. Transaction accounts, small time safe liquid investments to ensure
and savings deposits adequate deposit liquidity
d. Checking accounts and money e. Invest at least 65 percent of their
market mutual funds assets in mortgages or mortgage-
26. In 2016, the largest U.S savings related assets
institution was 30. Which of the following trends in the
a. USAA Federal Savings bank number and industry assets of
b. --- bank savings institutions is/are correct?
c. --- federal I. The number of savings institutions
d. --- has fallen over time
e. Charles Schewab Bank II. The number of savings institutions
27. After 2011, savings institutions have has increased over time
primarily been regulated ---- III. Total industry assets fell during
a. Federal Home Loan Bank Board the recession of the late 2000s
b. Federal Deposit Insurance IV. Total industry assets are falling
Corporation over time
c. Office of Thrift Supervision V. Total industry assets are stable
d. National Credit Union but the number of savings
Administration institutions has fallen
e. Office of the Comptroller of the a. II and III only
Currency b. I and III only
28. Which one of the following has the c. I and IV only
highest concentration of mortgage- d. II and IV only
related assets – balance sheet? e. V only
a. Savings institutions
b. Commercial banks
c. Credit unions
d. Finance companies
e. Pension funds