FIN 461 LATEST 2026 TEST PAPER QUESTIONS AND
ANSWERS RATED A+
✔✔20. Which of the following is true of off-balance-sheet activities?
a. They invite regulatory costs and additional "taxes."
b. The risk involved is best represented by notional or face value.
c. They include contingent activities recorded in the current balance sheet.
d. They have both risk-reducing as well as risk-increasing attributes.
e. They involve generation of fees without exposure to any risk. - ✔✔d. They have both
risk-reducing as well as risk-increasing attributes.
✔✔21. Which of the following identifies the primary function of the Office of the
Comptroller of the
Currency?
a. Regulate and examine bank holding companies as well as individual commercial
banks.
b. Charter national banks and approve their merger activity.
c. Determine permissible activities for state chartered banks.
d. Stand as the "lender of last resort" for troubled banks.
e. Manage the deposit insurance fund and carry out bank examinations - ✔✔b. Charter
national banks and approve their merger activity.
✔✔22. What was the primary objective of the Bank Holding Company Act of 1956?
a. Restricted the banking and nonbanking acquisition activities of multibank holding
companies.
b. Allowed for the creation of a financial services holding company.
c. Regulated foreign bank branches and agencies in the United States.
d. Permitted bank holding companies to acquire banks in other states.
e. Bank holding companies were permitted to convert out-of-state subsidiary banks
into branches of a single interstate bank. - ✔✔a. Restricted the banking and nonbanking
acquisition activities of multibank holding
companies.
✔✔23. Credit Unions were generally less affected than other depository institutions by
the recent financial
crisis because
a. they had relatively more assets in consumer loans than other DIs.
b. they hold more government and agency securities, on average.
c. they hold less government and agency securities, on average.
d. they had relatively more residential mortgages.
e. they had relatively more assets in consumer loans than other DIs and they hold
more government and agency securities, on average. - ✔✔e. they had relatively more
assets in consumer loans than other DIs and they hold
more government and agency securities, on average.
, ✔✔24. Compared to banks and savings institutions, credit unions are able to pay a
higher rate on the
deposits of members because
a. of their tax-exempt status.
b. they intend to attract new members.
c. Regulation Q still applies to the industry.
d. they are subject to the provisions of the Community Reinvestment Act.
e. they do not issue common stock. - ✔✔a. of their tax-exempt status.
✔✔25. Correspondent banking may involve
a. holding and managing assets for individuals or corporations.
b. providing banking services to other banks facing shortage of staff.
c. providing hedging services to corporations.
d. providing foreign exchange trading services to individuals.
e. acting as transfer and disbursement agents for pension funds. - ✔✔e. acting as
transfer and disbursement agents for pension funds.
✔✔26. Each of the following falls into the category of bank assets except:
a. loans.
b. investment securities.
c. demand deposits.
d. cash and due from banks.
e. other assets. - ✔✔c. demand deposits.
✔✔27. Which of the following adjustments are made to gross loans and leases to obtain
net loans and leases?
a. Loan and lease loss allowance is added to gross loans.
b. Unearned income is subtracted from gross interest received.
c. Investment income is added to gross interest received.
d. Loan and lease loss allowance and unearned income is subtracted from gross loans.
e. Loan and lease loss allowance is subtracted from gross loans and investment income
is
added to gross interest received. - ✔✔d. Loan and lease loss allowance and unearned
income is subtracted from gross loans.
✔✔28. An example of a contra-asset account is:
a. loan and lease loss allowance.
b. trading account assets.
c. buildings and equipment.
d. revenue bonds.
e. provision for loan loss. - ✔✔a. loan and lease loss allowance.
✔✔29. A financial institution's bad-debt reserve, as reported on its balance sheet, is
called:
a. unearned income or discount.
ANSWERS RATED A+
✔✔20. Which of the following is true of off-balance-sheet activities?
a. They invite regulatory costs and additional "taxes."
b. The risk involved is best represented by notional or face value.
c. They include contingent activities recorded in the current balance sheet.
d. They have both risk-reducing as well as risk-increasing attributes.
e. They involve generation of fees without exposure to any risk. - ✔✔d. They have both
risk-reducing as well as risk-increasing attributes.
✔✔21. Which of the following identifies the primary function of the Office of the
Comptroller of the
Currency?
a. Regulate and examine bank holding companies as well as individual commercial
banks.
b. Charter national banks and approve their merger activity.
c. Determine permissible activities for state chartered banks.
d. Stand as the "lender of last resort" for troubled banks.
e. Manage the deposit insurance fund and carry out bank examinations - ✔✔b. Charter
national banks and approve their merger activity.
✔✔22. What was the primary objective of the Bank Holding Company Act of 1956?
a. Restricted the banking and nonbanking acquisition activities of multibank holding
companies.
b. Allowed for the creation of a financial services holding company.
c. Regulated foreign bank branches and agencies in the United States.
d. Permitted bank holding companies to acquire banks in other states.
e. Bank holding companies were permitted to convert out-of-state subsidiary banks
into branches of a single interstate bank. - ✔✔a. Restricted the banking and nonbanking
acquisition activities of multibank holding
companies.
✔✔23. Credit Unions were generally less affected than other depository institutions by
the recent financial
crisis because
a. they had relatively more assets in consumer loans than other DIs.
b. they hold more government and agency securities, on average.
c. they hold less government and agency securities, on average.
d. they had relatively more residential mortgages.
e. they had relatively more assets in consumer loans than other DIs and they hold
more government and agency securities, on average. - ✔✔e. they had relatively more
assets in consumer loans than other DIs and they hold
more government and agency securities, on average.
, ✔✔24. Compared to banks and savings institutions, credit unions are able to pay a
higher rate on the
deposits of members because
a. of their tax-exempt status.
b. they intend to attract new members.
c. Regulation Q still applies to the industry.
d. they are subject to the provisions of the Community Reinvestment Act.
e. they do not issue common stock. - ✔✔a. of their tax-exempt status.
✔✔25. Correspondent banking may involve
a. holding and managing assets for individuals or corporations.
b. providing banking services to other banks facing shortage of staff.
c. providing hedging services to corporations.
d. providing foreign exchange trading services to individuals.
e. acting as transfer and disbursement agents for pension funds. - ✔✔e. acting as
transfer and disbursement agents for pension funds.
✔✔26. Each of the following falls into the category of bank assets except:
a. loans.
b. investment securities.
c. demand deposits.
d. cash and due from banks.
e. other assets. - ✔✔c. demand deposits.
✔✔27. Which of the following adjustments are made to gross loans and leases to obtain
net loans and leases?
a. Loan and lease loss allowance is added to gross loans.
b. Unearned income is subtracted from gross interest received.
c. Investment income is added to gross interest received.
d. Loan and lease loss allowance and unearned income is subtracted from gross loans.
e. Loan and lease loss allowance is subtracted from gross loans and investment income
is
added to gross interest received. - ✔✔d. Loan and lease loss allowance and unearned
income is subtracted from gross loans.
✔✔28. An example of a contra-asset account is:
a. loan and lease loss allowance.
b. trading account assets.
c. buildings and equipment.
d. revenue bonds.
e. provision for loan loss. - ✔✔a. loan and lease loss allowance.
✔✔29. A financial institution's bad-debt reserve, as reported on its balance sheet, is
called:
a. unearned income or discount.
