University of Miami Financial Institutions

Professor Indraneel Chakraborty Fall 2020

Final Exam

 

Please read the exam instructions carefully. After you read the instructions please print your name and student ID and sign the exam at the bottom and on the answer booklet.

1. Please do not discuss the examination with anyone else.

2. This exam book has 7 short answer questions (15 points each for 6 questions and 25 points for one question) worth a total of 115 points.

3. The exam is administered under the University’s rules of academic conduct; the Code of Academic Integrity applies. Discussing the questions with anyone who has not taken the test will violate the Code of Academic Integrity, and such cases will be dealt with extremely stringently.

 

First 3 Letters of Last Name: QUI

Name (Print): Erick Quinones Perez

E-mail ID: [email protected]

 

 

Best of luck!

 

 

 

 

1. (Monetary Economics and Finance)

a) What is the velocity of money?

b) What is the reason behind the decline in the velocity of money in recent years? (15 points)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2. (MBS/ABS) a. You have a client who is interested in purchasing fixed income securities with high interest rate risk. Unfortunately, all you have available on your balance sheet to sell is an MBS which does not have sufficient duration risk according to him. Can you tranche the MBS somehow to meet his demand? Please explain in some detail.

b. You want to bet that the default rates on mortgages are going to increase. How can you place such a bet in the mortgage markets? Explain your strategy in some detail. (15 points)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3. (MBS/ABS) a. Does high volatility in long term interest rates increase prepayment risk? Explain, why or why not.

b. If the long term interest rates come down, would the value of an MBS security increase or decrease? Please explain. (15 points)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4. (MBS/ABS) Consider a bank that has a pool of current fixed rate mortgages that are worth $100 million, yield a WAC of 3.8%, and have a WAM of 360 months with 125 PSA. What are the cash flows for the first two months? Estimate the beginning balance for month 3. (25 points)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5. Separated by over 3,000 nautical miles and five time zones, money and foreign exchange markets in both London and New York are very efficient. The following information has been collected from the respective areas:

 

Assumptions		London		New York
Spot exchange rate ($ per £)		1.2914		1.2914
One-year Treasury bill rate (respective countries)		0.100%		1.090%
Expected inflation rate		Unknown		2.400%

 

 

a. What do the financial markets suggest for inflation in U.K. next year?

b. Estimate today’s one-year forward exchange rate between the dollar and the pound. (15 points)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6. How does blockchain technology work? Please explain. (15 points)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7. (Monetary Policy) Explain the “Taylor Rule.’’ (15 points)

 

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Which type of criterion assesses improvements in certain characteristics of salespeople that are related to successful performance in the sales job?

Question options:

  

Profitability

 

Productivity

 

Professional development

 

Behavioral

 

Question 2

The more a salesperson performance evaluation system is behavior-based rather than outcome-based,

Question options:

  

the less likely that risk-averse   salespeople will be attracted, nurtured, and retained.

 

the more salespeople will have   reduced levels of intrinsic motivation.

 

the less salespeople identify with   and feel committed to the sales organization.

 

the less the need for using pay as   a control mechanism.

 

Question 3

Which one of the following evaluation procedures uses salespeople to identify important performance results and the critical activities and responses necessary to achieve these results?

Question options:

  

Graphic rating/checklist method

 

Team-evaluation consensus

 

Management by objectives (MBO)

 

Behaviorally anchored rating   scales(BARS)

 

Question 4

The mutual setting of well-defined and measurable goals within a specified time period is a concept incorporated into which type of performance evaluation method?

Question options:

  

Graphic rating/checklist method

 

Ranking method

 

Management by objectives (MBO)

 

Behaviorally anchored rating scale   (BARS)

 

Question 5

Practicality, a characteristic of salesperson performance evaluation methods, can be defined as

Question options:

  

the need for the measurement   instruments and evaluation process to be similar throughout the sales   organization.

 

the ability of the measure to   provide accurate assessments of the criteria they’re intended to measure.

 

the ability of the measure to meet   the needs of the sales organization.

 

the need for both sales managers   and salespeople to understand the entire performance-appraisal process and to   be able to implement the process in a reasonable amount of time.

 

Question 6

Usefulness, a characteristic of salesperson performance evaluation methods, can be defined as

Question options:

  

the need for the measurement   instruments and evaluation process to be similar throughout the sales   organization.

 

the ability of the measure to   provide accurate assessments of the criteria they’re intended to measure.

 

the ability of the measure to   provide information that is valuable to sales managers in making various   decisions.

 

the need for the measures to be   stable over time and exhibit internal consistency.

 

Question 7

Which of the following statements concerning performance management is false?

Question options:

  

Salespeople are compensated on the   value of their contributions to the <br /> organization’s success.

 

Salespeople assume responsibility   for their careers.

 

Sales managers act as partners in   the performance appraisal process.

 

Sales managers create development   plans for salespeople to follow.

 

Question 8

The initial use of the information provided by the various salesperson performance evaluation methods is

Question options:

  

to identify potential problems in   training.

 

to determine the absolute and   relative performance of each salesperson.

 

to identify areas where   salespeople need to improve for better performance in the future.

 

to use the information to improve   the overall operations of the sales organization.

 

Question 9

The results of salesperson performance evaluations can be used for all of these sales management purposes except to

Question options:

  

identify salespeople that might   need to be terminated and to supply <br /> evidence to support the need   for termination.

 

identify salespeople that might be   promoted.

 

assess the adequacy of a firm’s   sales management process and to provide <br /> direction for improved   performance and prescription for needed changes.

 

ensure that compensation and other   reward disbursements are consistent <br /> with actual salesperson   performance.

 

Question 10

When using a 360-degree feedback system, feedback may be obtained from

Question options:

  

oneself.

 

one’s sales manager.

 

customers or team members.

 

Any or all of the above.

 

Question 11

The dimensions of job satisfaction that the INDSALES scale attempts to measure include all of the following except

Question options:

  

company policy and support.

 

the job.

 

customers.

 

competitor sales jobs.

 

Question 12

A behavior-based perspective to evaluating and controlling salesperson performance

Question options:

  

focuses on objective measures of   results.

 

has very little monitoring or   directing of salespersons by sales managers.

 

incorporates complex and often   subjective assessments of salesperson characteristics.

 

may lead to a focus on short-term   outcomes.

 

Question 13

When attempting to use the diagnostic information provided by salesperson-evaluation methods, the major difficulty is in

Question options:

  

reviewing the performance of each   individual salesperson against each relevant criterion.

 

attempting to summarize the   results across all salespeople being supervised.

 

isolating the specific causes of   low performance.

 

determining which salespeople   aren’t meeting their sales quotas.

 

Question 14

In salesperson evaluations, which one of the following behavioral criterion do most sales organizations focus on?

Question options:

  

Number of demonstrations conducted

 

Number of required reports   submitted

 

Number of customer calls

 

Number of letters/phone calls to   prospects

 

Question 15

Which of the following statements regarding the use of outcome-based and behavior-based perspectives in the evaluation of salesperson performance is false?

Question options:

  

A review of current practice   indicates a tendency toward a <br /> behavior-based perspective.

 

Most sales organizations operate   somewhere between the two extreme positions.

 

The relative emphasis on   outcome-based and behavior-based measures <br /> depends upon   environmental, firm, and salesperson considerations.

 

A salesperson’s performance on   post-sale service is considered a <br /> behavior-based measure.

 

Question 16

The sample statement, “Management is progressive,” used in the INDSALES scale would be attempting to measure which dimension of job satisfaction?

Question options:

  

Pay

 

Promotion and advancement

 

Customers

 

Company policy and support

 

Question 17

Behaviorally anchored rating scales (BARS) are a unique evaluation procedure because they’re the only method that

Question options:

  

tries to link salesperson   behaviors with specific results.

 

tries to link salesperson   behaviors with promotability.

 

attempts to correlate   sales-training methods with sales results.

 

uses behavior to predict a   salesperson’s level of motivation.

 

Question 18

Which method of salesperson performance evaluation has been described as having problems related to the “halo effect”?

Question options:

  

Graphic rating/checklist method

 

Ranking methods

 

Management by objectives (MBO)

 

Behaviorally anchored rating   scales (BARS).

 

Question 19

All of the following are benefits of a 360-degree feedback system except

Question options:

  

it reduces assessment bias.

 

it detects barriers to success.

 

it eliminates sales manager   involvement.

 

it helps better understand   customer needs.

 

Question 20

Which of the following statements regarding the use of the scale termed INDSALES is false?

Question options:

  

It’s a scale for evaluating the   job satisfaction of salespeople.

 

In using the scale, salespeople   indicate their level of agreement with a <br /> number of statements   concerning their particular sales job.

 

The scale uses statements designed   to measure satisfaction in five <br /> general areas.

 

The answers salespeople give to   the scale statements are summed to form <br /> an overall salesperson   satisfaction score.

 

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