商业银行管理彼得S罗斯英文原书第8版英语试题库Chap009

1、146/ 17Chapter 9Risk Man ageme nt: Asset-Backed Securities, Loa n Sales, Credit Stan dbys, andCredit DerivativesFill in the Bia nk Questio ns1.When a bank sets aside a group of income-earning assets and then sells securities based uponthose assets it is_those assets.An swer: securitiz ing2.Often whe

2、n loans are securitized they are passed on to a_whopools the loa ns and sells securities.An swer: special purpose en tity3.A(n)_allows a homeowner to borrow against the residual value oftheir reside nee.An swer: home equity loa n4._ allow the bank to gen erate fee in come after they have sold a loa

3、n.The bank con ti nues to collect in terest and prin cipal from the borrowers and passes these collections to the loa n buyers.An swer: Servici ng rights5.In a_ an outsider purchases part of a loa n from the sell ing finan cialin stituti on. Gen erally the purchaser has no in flue nee over the terms

4、 of the loa n con tract.An swer: participati on loa n6.A(n)_is a contingent claim of the bank that issues it. The issuingbank, in retur n for a fee, guara ntees the repayme nt of a loa n received by its customer or thefulfillme nt of a con tract made by its customer to a third party.An swer: sta ndb

5、y credit agreeme nt7.A(n)_occurs when two banks agree to exchange a portion or all ofthe loa n repayme nts of their customers.An swer: credit swap8.A(n)_ guards against the losses in the value of a credit asset. It would payoff if the asset decli nes sig nifica ntly in value or if it completely tur

6、ns bad.An swer: credit opti on.9.A(n)_combines a normal debt instrument with a credit option. Itallows the issuer of the debt instrument to lower its loan repayments if some significant factor cha nges.147 / 17An swer: credit lin ked note10. The_ of a standby letter of credit is a bank or other inve

7、stor who isconcerned about the safety of funds committed to the recipie nt of the sta ndby letter of credit.An swer: ben eficiary11. A(n)_guarantees the s a specific rate of return on their credit asset.Bank A may agree to pay the total retur n on the loa n to Bank B plus any appreciati on in the ma

8、rketvalue of the loa n. In retur n Bank A will ofte n get LIBOR plus a fixed spread plus any depreciati on inthe value of the loa n.An swer: total retur n swap12. The_is the party that is requesting a standby letter of credit.An swer: acco unt party13. The_ is the bank or financial institution which

9、 guarantees the payment ofthe loa n in a sta ndby letter of credit.An swer: issuer14. A(n)_is a loan sale where ownership of the loan is transferred tothe buyer of the loan, who then has a direct claim against the borrower.An swer: assig nment15. Another type of loan sale is a(n)_which is a short da

10、ted piece of aIon ger maturity loa n, en titl ing the purchaser to a fracti on of the expected loa n in come.An swer: loa n strip16. A relatively new type of credit derivative is a CDO which stands for_An swer: collateralized debt obligati on17. In sura nee compa nies are a prime_ of credit derivati

11、ves.An swer: seller18. A(n)_is an over-the-counter agreement offering protection againstloss whe n default occurs on a loa n or other debt in strume nt.An swer: credit derivative19. A(n)_ is related to the credit option and is usually aimed at lendersable to han dle comparatively limited decli nes i

12、n value but wants in sura nee aga inst serious losses.An swer: credit default swap20. There has been an explosion in_ in reeent years. These instruments reston pools of credit derivatives that mainly in sure aga inst defaults on corporate bon ds. The creators of148/ 17these in strume nts do not have

13、 to buy and pool actual bonds but can create these in strume nts andgen erate reve nues from sell ing and tradi ng in them.An swer: syn thetic CDOs (Collateralized debt obligati ons)21. A_ rates the securities to be sold from a pool of securitized loansso that investors have a better idea of what th

14、e new securities are likely to be worth.An swer: credit rat ing age ncy22. A(n) _is an assura nee that in vestors will be repaid in the eve nt ofthe default of the un derly ing loa ns in a securitizati on. These can be in ter nal or exter nal to thesecuritization process and lower the risk of the se

15、curities.An swer: credit enhan ceme nt23. When the FHLMC creates CMOs they often use different _which eachpromise a differe nt coup on rate and which have differe nt maturity and risk characteristics.24. Lenders can set aside a group of loans on their balanee sheet, issue bonds and pledge the loans

16、ascollateral aga inst the bonds in_ . These usually stay on thebankbalance sheet as liabilities.25. FNMA (Fannie Mae) and FHLMC (Freddie Mac) are examples of _They appear to have the uno fficial back ing of the federal gover nment in the eve nt of default. An swer:gover nment spon sored en terprises

17、 (GSEs)True/False Questi onsT F 26. Securitization is designed to turn illiquid loans into liquid assets in the form of securities sold in theope n market.An swer: TrueT F 27. Securitization has the added advantage of generating fee income for banks. An swer: TrueT F 28. Securitized assets cannot be

18、 removed from a banks balance sheet until they mature. An swer: FalseT F 29. Securitization raises the level of competition for the best-quality loans among banks. An swer: TrueT F 30. Servicing rights on loans sold consist of the collection of interest and principal payments fromborrowers and mon i

19、tori ng borrower complia nee with loa n terms.An swer: TrueT F 31. A loan sold by a bank to another investor with recourse means the bank has given the in vestor a call149 / 17opti on on the loa n.An swer: FalseT F 32. An account party will seek a banks standby credit guarantee if the banks fee for

20、issuing the guarantee is less tha n the value assig ned the guara ntee by its ben eficiary.An swer: TrueT F 33. Securitization tends to lengthen the maturity of a banks assets. An swer: FalseT F 34. Securitized assets as a source of bank funds are subject to reserve requirements set by the FederalRe

21、serve Board.An swer: FalseT F 35. Securitizations of commercial loans usually carry the same regulatory capital requireme nts for abank as the origi nal loa ns themselves.An swer: TrueT F 36. Most loans that banks sell off their balanee sheets have minimum denominations of at least a million dollars

22、.An swer: TrueT F 37. Most loans that banks sell off their balanee sheets carry interest rates that usually are conn ected toIon g-term in terest rates (such as the 30-year Treasury bond rate).An swer: FalseT F 38. In a participati on loa n the purchaser is an outsider to the loa n con tract betwee

23、n the financialinstitution selling the loan and the borrower.An swer: TrueT F 39. The buyer of a loan participation must watch both the borrower and the seller bank closely.An swer: TrueT F 40. Under an assignment ownership of a loan is transferred to the buyer, though the buyer still holds onlyan i

24、n direct claim aga inst the borrower.An swer: FalseT F 41. Loa n sales are gen erally viewed as risk-reduc ing for the selli ng finan cial in stituti on. An swer: TrueT F 42. In a CMO, the different tiers (or tranches) of security purchasers face the same prepayme nt risk.An swer: FalseT F 43. A sta

25、ndby letter of credit substantially reduces the issuing banks interest rate risk and liquidity risk.150 / 17An swer: FalseT F 44. Securitizati on of loa ns can easily be applied to bus in ess loa ns since these loa ns tend to havesimilar cash flow schedules and comparable risk structures.An swer: Fa

26、lseT F 45. The advantage of a credit s that it allows each bank in the s broaden its market area and spread outits credit risk on its loans.An swer: TrueT F 46. Bank use of credit derivatives is dominated by the largest banks. An swer: TrueT F 47. The credit derivatives market has grown nine-fold du

27、ring the recent years. An swer: TrueT F 48. Banks are the principal sellers of credit derivatives.An swer: FalseT F 49. Banks are one of the principal buyers of credit derivatives. An swer: TrueT F 50. Insurance companies are one of the principal sellers of credit derivatives. Answer: TrueMultiple C

28、hoice Questions51.Securitized assets carry a unique form of risk called:A)Default riskB)Inflation riskC)Interest-rate riskD)Prepayment riskE)None of the aboveAnswer: D52.Short-dated pieces of a longer-term loan, usually maturing in a few days or weeks, are called:A)Loan participationsB)Servicing rig

29、htsC)Loan stripsD)Shared creditsE)None of the above Answer: C53.The party for whom a standby credit letter is issued by a bank is known as the:A)Account partyB)BeneficiaryC)Representative151 / 17D)Credit GuarantorE)None of the aboveAnswer: A54.When a bank issues a standby credit guarantee on behalf

30、of one of its customers, the partyreceiving the guarantee is known as the:A)Account partyB)BeneficiaryC)ObligatorD)Servicing agentE)None of the above Answer: B55.Securitization had its origin in the selling of securities backed by _A)Credit card receivablesB)Residential mortgage loansC)Computer leas

31、esD)Automobile loansE)Truck leases Answer: B56.Loan-backed securities, which closely resemble traditional bonds, carry various forms of creditenhancements, which may include all of the following, EXCEPT:A)Credit letter guaranteeing repayment of the securities.B)Set aside of a cash reserve.C)Division

32、 into different risk classes.D)Early payment clauses.E)None of the above.Answer: D57.In some instances, a bank will sell loans and agree to give the loan purchaser recourse to the seller forall or a portion of those loans that become delinquent. In this case, the purchaser, in effect, gets a:A)Call

33、option.B)Put option.C)Forward contract.D)Futures contractE)None of the above. Answer: B58.The key advantages of issuing standby letters of credit include which of the following:A)Letters of credit generate fee income for the bank.B)Letters of credit typically reduce the borrowers cost of borrowing.C

34、)Letters of credit can usually be issued for a relatively low cost.D)The probability is low that the issuer of the letter of credit will be called upon to pay.E)All of the above.Answer: E59.Banks that issue standby letters of credit may face which of the following types of risk?152 / 17A)Prepayment

35、risk.B)Interest-rate risk.C)Liquidity risk.D)All of the above.E)B and C only.Answer: E59. By agreeing to service any assets that are packaged together in the securitization process a bank can:A)Ensure the assets that are packaged and securitized remain in the package and are not sold off.B)Choose th

36、e best loans to go through the securitization process.C)Earn added fee income.D)Liquidate any assets it chooses.E)None of the above. Answer: C60.The difference in interest rates between securitized loans themselves and the securities issued againstthe loans is referred to as:A)The funding gapB)Resid

37、ual income.C)Service returnsD)Security incomeE)None of the above Answer: B61.If a credit letter is issued to backstop payments on loan-backed securities, the credit letter is a form of:A)Collateralized assetB)Residual incomeC)Direct loan obligationD)Credit enhancementE)None of the above Answer: D62.

38、Loan sales by banks are generally of two types: (a) participation loans; and (b)_. Theterm that correctly fills in the blank above is:A)AssignmentsB)Recourse loansC)Direct loansD)Subscription loansE)None of the above. Answer: A63.A standby credit letter is a (or an):A)Securitized stripB)Loan stripC)

39、Contingent obligationD)Indirect loanE)None of the above.Answer: C64.A bank that wants to protect itself from higher credit costs due to a decrease in its credit rating might153 / 17purchase _ .A)A credit risk optionB)A standby letter of creditC)A credit linked noteD)A credit swapE)None of the aboveA

40、nswer: A65.When two banks simply agree to exchange a portion of their customers loan repayments, they areusing:A)A credit optionB)A standby letter of creditC)A credit linked noteD)A credit swapE)None of the above Answer: D66.A debt instrument which allows the issuer to lower its coupon payments if s

41、ome significant factorchanges is called:A)A credit optionB)A standby letter of creditC)A credit linked noteD)A credit swapE)None of the above Answer: C67.Which of the following is a risk of using credit derivatives?A)Credit derivatives do not protect against credit risk exposureB)The partner in the

42、s option contract may fail to performC)Regulators may decide to lower the amount of capital needed for banks using these derivativesD)Regulators may decide that these derivatives make the bank more stable and efficientE)All of the above are risks of using credit derivativesAnswer: B68.A securitized

43、asset where the asset used to back the securities is a loan based on the residual value ofa homeowners residence is called:A)A mortgage backed securityB)A credit card backed securityC)An automobile backed securityD)A loan backed bondE)A home equity loan backed security Answer: E69.A financial instit

44、ution plans to issue a group of bonds backed by a pool of automobile loans. However,they fear that the default rate on the automobile loans will rise well above 4 percent of the portfolio theprojected default rate. The finan cial in stituti on wants to lower the in terest payments if the loan defaul

45、trate rises too high. Which type of credit derivative contract would you most recommend for thissituation?154 / 17A)Credit linked noteB)Credit optionC)Credit risk optionD)Total return swapE)Credit swapAnswer: A70.A bank is about to make a $50 million project loan to develop a new oil field and is wo

46、rried that thepetroleum engineers estimates of the yield on the field are incorrect. The bank wants to protect itself incase the developer cannot repay the loan. Which type of credit derivative contract would you mostrecommend for this situation?A)Credit linked noteB)Credit optionC)Credit risk optio

47、nD)Total return swapE)Credit swapAnswer: B71.A bank plans to offer new subordinated notes in the open market next month but knows that its creditrating is being reviewed by a credit rating agency. The bank wants to avoid paying sharply higher creditcosts. Which type of credit derivative contract wou

48、ld you most recommend for this situation?A)Credit linked noteB)Credit optionC)Credit risk optionD)Total return swapE)Credit swapAnswer: C72.A bank is concerned about excess volatility in its cash flows from some recent business loans it hasmade. Many of these loans have a fixed rate of interest and

49、the banks economics department hasforecast a sharp increase in interest rates. The bank wants more stable cash flows. Which type of creditderivative contract would you most recommend for this situation?A)Credit linked noteB)Credit optionC)Credit risk optionD)Total return swapE)Credit swapAnswer: D73

50、.A bank has a limited geographic area. It would like to diversify its loan income with loans in other marketareas but does not want to actually make loans in those areas because of their limited experience inthose areas. Which type of credit derivative contract would you most recommend for this situ

51、ation?A)Credit linked noteB)Credit optionC)Credit risk optionD)Total return swapE)Credit swap155 / 17Answer: E74.A bank has a long term relationship with a particular business customer. However, recently the bankhas become concerned because of a potential deterioration in the customers income. In ad

52、dition,regulators have expressed concerns about the banks capital position. The business customer hasasked for a renewal of its $25 million dollar loan with the bank. Which credit derivative can help thissituation?A)Credit swapB)Loan saleC)Loan securitizationD)Credit risk optionE)Credit linked notes

53、Answer: B75.A bank has placed 5000 consumer loans in a package to be securitized. These loans have an annualyield of 15.25 percent. This bank estimates that the securities on these loans are priced to yield 10.95percent. The bank expects 1.45 percent of the loans will default. Underwriting and advis

54、ory services willcost .25 percent and a credit guarantee if more loans default than expected will cost .35 percent. Whatis the residual income from this loan securitization?A)3.70 percentB)4.30 percentC)2.25 percentD)5.15 percentE)None of the aboveAnswer: C76.Bank use of credit derivatives is domina

55、ted byA)Community BanksB)The largest (over $1 billion) banksC)The retail banksD)None of the banksE)Banks do not use credit derivatives yet Answer: B77.According to the text, in 2005 the securitization of loans reached:A) Million dollar marketB) Billion dollar marketC) Trilli on dollar marketD) Marke

56、t unknown in valueE) Small but growing marketAn swer: C78.The principal sellers of credit derivatives include all of the following except:A) In sura nee compa niesB) Securities dealersC) Fund management firmsD) BanksE) None of the above156 / 17An swer: D79.The bank or other lender whose loans are po

57、oled is called:A) The origi natorB) The special purpose en tityC) The trusteeD) The servicerE) The credit enhancerAn swer: A80.Loa ns that are to be securitized pass to_ . This helps en sure that if the len dergoes bankrupt it does not affect the credit status of the pooled loans.A) The origi natorB

58、) The special purpose en tityC) The trusteeD) The servicerE) The credit enhancerAn swer: B81.Some one appo in ted to en sure that the issuer fulfills all the requireme nts of the tran sfer of the loansto the pool and provides all of the services promised to investors in the securities is called:A) T

59、he origi natorB) The special purposeen tityC) The trusteeD) The servicerE) The credit enhancerAn swer: C82.Someone who collects the payments on the securitized loans and passes those payments on to thetrustee is called:A) The originatorB) The special purpose entityC) The trusteeD) The servicerE) The

60、 credit enhancer Answer: D83.Investors in securitized loans normally receive added assurance that they will be repaid in the form ofguarantees against default issued by:A) The originatorB) The special purpose entityC) The trusteeD) The servicerE) The credit enhancer Answer: E84.When an issuer of sec