VER 1

Question 1: (5 marks)
1.1. In the market for reserves, if the federal funds rate is above the interest rate paid on
excess reserves, an open market purchase _____ the _____ of reserves which causes the
federal funds rate to fall, everything else held constant.
A) increases; supply B) increases; demand
C) decreases; supply D) decreases; demand

1.2. When a primary dealer buys a government bond from the Federal Reserve, reserves in
the banking system _____ and the monetary base _____, everything else held constant.
A) increase; increase B) increase; decrease
C) decrease; increase D) decrease; decrease

1.3. The ability of a central bank to set monetary policy instruments is

A) political independence. B) goal independence.
C) policy independence. D) instrument independence.

1.4. If mortgage brokers do not make a strong effort to evaluate the borrower can pay off a
loan, this creates a
A) severe adverse selection problem. B) decrease in moral applications.
C) fail to deregulate the industry. D) decrease in the demand for houses.

1.5. The amount of checkable deposits that banks are required by regulation to hold are the
A) excess reserves. B) required reserves.
C) vault cash. D) total reserves.

1.6. If a bank has $200,000 of checkable deposits, a required reserve ratio of 20 percent,
and it holds $80,000 in reserves, then the maximum deposit outflow it can sustain without
altering its balance sheet is
A) $50,000. B) $40,000. C) $30,000. D) $25,000.

1.7. One purpose of regulation of financial markets is to

A) limit the profits of financial institutions.
B) increase competition among financial institutions.
C) promote the provision of information to shareholders, depositors and the public.
D) guarantee that the maximum rates of interest are paid on deposits.

1.8. A stock's price will fall if there is

A) a decrease in perceived risk. B) an increase in the required rate of return
C) an increase in the future sales price. D) current dividends are high.

1.9. Economists' attempts to explain the term structure of interest rates

A) illustrate how economists modify theories to improve them when they are
inconsistent with the empirical evidence.
B) illustrate how economists continue to accept theories that fall to explain observed
behavior of interest rate movements.
C) prove that the real world is a special case that tends to get short shrift in theoretical
models.
D) have proved entirely unsatisfactory to date.

1.10. A corporation acquires new funds only when its securities are sold in the
A) secondary market by an investment bank.
B) primary market by an investment bank.
C) secondary market by a stock exchange broker.
D) secondary market by a commercial bank.

Question 2: (2 marks)
Assume that you purchased an 8 percent, 5-year, $1,000 par, annual payment bond
priced at $1,012.50 when it has 3 years remaining until maturity. Compute its
promised yield to maturity by two methods: (1) by financial calculator; (2) by trial-and-
errors method (prove the method get the approximate result)

Question 3: (2 marks)
Present the brief meaning of fundamental analysis and technical analysis in investing
securities. Which method is usually used by Vietnamese investors in this period of
time? Why?
* Fundamental Analysis
- Evaluates a security’s intrinsic value by analyzing:
+) Economic factors: GDP growth, interest rates, inflation.
+) Industry conditions: Market trends, competition.
+) Company fundamentals: Financial statements (P/E ratio, ROE, debt), management
quality, growth prospects.
- Goal: Identify stocks that are undervalued or overvalued compared to their intrinsic value,
targeting long-term investment based on fundamental improvements and value creation .
* Technical Analysis
- Predicts price movements using:
+) Historical data: Price charts, trading volume.
+) Statistical tools: Moving averages, RSI, MACD, candlestick patterns.
- Goal: Predict short to medium-term price direction, primarily for trade entry and exit points
* Most Vietnamese investors use Technical Analysis due to:
- Ease of Access and Application
+) Charting tools (e.g., TradingView, SSI, FireAnt) are free and integrated into most
brokerage platforms.
+) Technical indicators are intuitive and easier to apply than reading financial reports or
understanding valuation models.
+) Requires less financial literacy, making it more suitable for new investors.
- Market Structure and Investor Base
+) Retail investors dominate the market, accounting for ~90% of trading volume.
+) Many investors focus on short-term profits and use technical analysis to time entries
and exits.
+) Small- and mid-cap stocks—which are more volatile—are popular among traders,
making technical analysis more applicable.
- Speculative Culture and Behavioral Biases
+) Herd mentality is amplified through social media platforms like Facebook and Zalo,
where trading tips often rely on chart signals rather than company fundamentals.
+) Many investors chase "hot stocks" based on recent price action rather than intrinsic
value.
+) The market exhibits trend-following behavior, which suits tools like moving averages
and RSI.
- Market Inefficiency and Predictable Patterns
+) The Vietnamese stock market is not fully efficient and shows serial correlation in
returns, allowing traders to exploit price patterns.
+) Technical analysis thrives in such environments where prices reflect psychology
more than fundamentals.

VER 2

1.7 Reserve Requirement Analysis

If a bank has:
$10 million checkable deposits 10% required reserve ratio $2 million reserves
It cannot support a deposit outflow of:
A) $1.2 million B) $1.1 million C) $1 million D) $900,000

1.8 Stock Risk Perception

A change in perceived stock risk affects:
A) Expected dividend growth rate B) Expected sales price
C) Required rate of return D) Current dividend

1.9 Yield Curve Interpretation

A mildly upward-sloping yield curve under liquidity premium theory suggests:
A) Rising then falling short-term rates B) Stable short-term rates
C) Falling then rising short-term rates D) Steeply declining short-term rates

1.10 Capital Acquisition

Corporations obtain new funds when securities are sold in:
A) Primary market (investment bank) B) Primary market (stock exchange broker)
C) Secondary market (securities dealer) D) Secondary market (commercial bank)

Question 2: Assume that you purchased an 8 percent, 5-year, $1,000 par, semiannual
payment bond priced at $1,012.50 when it has 1.5 years remaining until maturity.
Compute its promised yield to maturity by two methods: (1) by financial calculators;
(2) by trial-and-errors method (prove the method got the approximate result)

Question 3: Distinguish between on balance sheet and off balance sheet activities of
commercial banks. Discuss the effectiveness of risk management among Vietnamese
commercial banks recently.
I. Distinction Between On-Balance-Sheet and Off-Balance-Sheet Activities of Commercial
Banks
1. On-Balance-Sheet Activities
These are traditional banking operations that appear directly on a bank’s balance sheet.
They reflect the bank’s financial position through its assets, liabilities, and equity.
Examples:
- Assets: Loans to individuals and businesses, mortgages, investment in securities (e.g.,
government bonds).
- Liabilities: Deposits (savings, demand, term deposits).
- Equity: Charter capital, retained earnings

➡️These activities involve credit risk, interest rate risk, and liquidity risk, which are managed
through capital adequacy ratios, loan classification, and provisioning under regulatory
frameworks (e.g., Basel II/III).

2. Off-Balance-Sheet (OBS) Activities

These are contingent commitments or transactions that do not appear directly on the
balance sheet but can affect the bank's risk exposure and profitability.
Examples:
- Credit commitments: Undrawn credit lines, letters of credit (LCs), bank guarantees.
- Derivatives: Interest rate swaps, forward currency contracts.
- Securitized assets: Loans transferred to Special Purpose Vehicles (SPVs).
- Investment trusts or joint ventures not consolidated.
➡️OBS activities involve no immediate cash flow, but carry significant credit, market, and
liquidity risks, and must be accounted for in risk-weighted assets under Basel frameworks.
✅ II. Risk Management Effectiveness in Vietnamese Commercial Banks (2023–2025)
🔹 Key Improvements
- Basel II/III adoption: Vietcombank & Techcombank fully apply Basel II (IRB); MB, BIDV,
ACB move toward Basel III (LCR, NSFR).
- Credit risk control: NPL ratios remain low (Vietcombank ~0.7%, MB ~1.1%). Internal credit
scoring and CIC data widely used.
- Market & liquidity risk: Banks apply VaR models, early warning systems; Techcombank
leads in FX and ALM management.
- Operational risk: MB, TPBank, VPBank deploy eKYC, AI fraud detection, and cybersecurity
tools.
⚠️Ongoing Challenges
- Off-balance-sheet (OBS) risk: LCs, guarantees, and loan commitments lack full quantitative
risk modeling. Transparency still limited.
- Real estate exposure: Many banks face high risk from volatile property lending.
- Uneven practices: Small banks lag in risk systems and depend on external consultants.

MIDTERM
Code 1
1. Which of the following instruments are NOT traded in capital markets?
A) U.S. government agency securities B) State and local government bonds
C) Repurchase agreements D) Corporate bonds
2. An increase in corporate bond risk will ______ corporate bond yields and ______
Treasury yields, all else equal.
A) Increase; increase B) Reduce; reduce
C) Increase; reduce D) Reduce; increase
3. In the Gordon Growth Model, the assumed growth rate must be ______ the required
equity return.
A) Greater than B) Equal to
C) Less than D) Proportional to
4. When $1 million is deposited at a bank with a 20% reserve requirement and no excess
reserves are held:
A) Bank assets increase by $800,000 B) Bank liabilities increase by $1,000,000
C) Bank liabilities increase by $800,000 D) Reserves increase by $160,000
5. First National Bank holds $2M vault cash + $8M at Fed + $1M required reserves. Its
excess reserves equal ______ million.
A) Three B) Nine C) Ten D) Eleven
6. U.S. Treasury bonds are considered default-free because:
A) They have strictly limited issuance
B) The government can tax or print currency to meet obligations
C) They are gold-backed
D) They are convertible to silver
7. Which statement is TRUE regarding bond markets?
A) Higher tax rates increase Treasury demand, lowering their yields
B) Pre-WWII municipal bonds had higher yields than Treasuries due to low tax
benefits
C) Tax-exempt municipal bonds offer higher rates than taxable equivalents
D) Municipal bonds provide better after-tax returns for low-income investors
8. A steeply upward-sloping yield curve indicates:
A) Long-term rates exceed short-term rates B) Short-term rates exceed long-term rates
C) Short and long-term rates are similar D) Medium-term rates are highest
9. If a security pays $35 in one year and $133 in three years, its present value is $150 if the
interest rate is
A) 5 percent. B) 10 percent. C) 12.5 percent. D) 15 percent.
10. If $22,080 is the amount payable in two years for a $20,000 simple loan made today, the
interest rate is
A) 5 percent. B) 10 percent. C) 22 percent. D) 25 percent.
Code 2
1. U.S. government bonds have no default risk because
A) they are issued in strictly limited quantities.
B) the federal government can increase taxes or print money to pay its obligations.
C) they are backed with gold reserves.
D) they can be exchanged for silver at any time.
2. Which of the following statements are TRUE?
A) An increase in tax rates will increase the demand for Treasury bonds, lowering their
interest rates.
B) Because the tax-exempt status of municipal bonds was of little benefit to bond
holders when tax rates were low, they had higher interest rates than U.S. government
bonds before World War II.
C) Interest rates on municipal bonds will be higher than comparable bonds without the tax
exemption.
D) Because coupon payments on municipal bonds are exempt from federal income tax, the
expected after-tax return on them will be higher for individuals in lower income tax brackets.
3. When yield curves are steeply upward sloping
A) long-term interest rates are above short-term interest rates.
B) short-term interest rates are above long-term interest rates.
C) short-term interest rates are about the same as long-term interest rates.
D) medium-term interest rates are above both short-term and long-term interest rates.
4. If a security pays $55 in one year and $133 in three years, its present value is $150 if the
interest rate is
A) 5 percent. B) 10 percent. C) 12.5 percent. D) 15 percent.
5. If $22,050 is the amount payable in two years for a $20,000 simple loan made today, the
interest rate is
A) 5 percent. B) 10 percent. C) 22 percent. D) 25 percent.
6. Which of the following are NOT traded in a capital market?
A) U.S. government agency securities B) state and local government bonds
C) repurchase agreements D) corporate bonds
7. An increase in the riskiness of corporate bonds will ______ the yield on corporate bonds
and ______ the yield on Treasury securities, everything else held constant.
A) increase; increase B) reduce; reduce
C) increase; reduce D) reduce; increase
8. In the Gordon Growth Model, the growth rate is assumed to be ______ the required return
on equity.
A) greater than B) equal to C) less than D) proportional to
9. When $1 million is deposited at a bank, the required reserve ratio is 20 percent, and the
bank chooses not to hold any excess reserves but makes loans instead, then, in the bank's
final balance sheet
A) The assets at the bank increase by $800,000.
B) The liabilities of the bank increase by $1,000,000.
C) The liabilities of the bank increase by $800,000.
D) Reserves increase by $160,000.
10. First National Bank holds:
$2 million vault cash
$8 million deposited with the Federal Reserve
$1 million required reserves
Excess reserves = ______ million
A) Three B) Nine C) Ten D) Eleven