Chapter 19 Answers

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Under the purchase-of-stock method, the acquired bank ceases to exist as a separate corporation. Question 1 options: True False Question 2 (1 point) Saved Listen In recent years, financial services industry has consistently ranked in the top five of all U.S. industries in the number or value of merger transactions every year. Question 2 options: True False Question 3 (1 point) Saved Listen Mergers with anticompetitive effects cannot go unchallenged by federal authorities unless the banks can show that the combined bank would have significant public benefits. Question 3 options: True False Question 4 (1 point) Saved Listen In the United States, most bank mergers have occurred in which of the following geographic region of the country? Question 4 options:
A)  Southeastern U.S. B)  Northeastern U.S. C)  The West D)  The Midwest E)  Southwestern U.S. Question 5 (1 point) Saved Listen According to the textbook, bank mergers are often motivated by: Question 5 options: A)  profit potential. B)  expected reduction in the risk of fluctuation in cash flow and earnings. C)  expected tax benefits. D)  market-positioning strategies. E)  All of the options are correct. Question 6 (1 point) Saved Listen The most important goal of any merger should be to increase the market value of the surviving firm. Question 6 options:
True False Question 7 (1 point) Saved Listen There are three banks in East Panhandle. First State Bank which currently has 25 percent of the deposits, Second State Bank which currently has 40 percent of the deposits, and Third State Bank which has the rest. According to the Department of Justice Guidelines, this market will be identified as: Question 7 options: A)  unconcentrated B)  mildly concentrated. C)  moderately concentrated. D)  highly concentrated. E)  monopoly. Question 8 (1 point) Saved Listen According to the textbook, the lackadaisical profit performance surrounding a merger may be explained by the: Question 8 options: A)  tax inefficiencies due to a merger. B)  lenders cutting off credit lines due to the merger.
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C)  accounting irregularities when reporting earnings of the combined entity D)  managerial hubris and sizeable merger premium that acquirers have to pay to shareholders of the acquired firms. E)  All of the options are correct Question 9 (1 point) Saved Listen One of the most common motives for large banks to acquire smaller banks is to gain access to capable new management which is always in short supply at larger institutions. Question 9 options: True False Question 10 (1 point) Saved Listen Bank executives identify the most important factor in choosing a merger target as the ability of the merged bank to better accommodate their corporate customers. Question 10 options: True False Question 11 (1 point) Saved Listen In the United States, regulations require bank merger premiums to range between 150 to 250 percent. Question 11 options:
True False Question 12 (1 point) Saved Listen A study by the Federal Reserve Board indicates that there are economies of scale (cost savings) resulting from mergers among relatively smaller banks and insurance companies. Question 12 options: True False Question 13 (1 point) Saved Listen A merger may increase a bank's expected future earnings or reduce its level of risk exposure by: Question 13 options: A)  improved operating efficiency. B)  increased earnings per share. C)  geographic or product diversification. D)  product diversification. E)  All of the options are correct. Question 14 (1 point) Saved Listen
The 2007-2009 credit crunch resulted in numerous banks experiencing financial distress for which mergers and acquisitions were often the only option. Question 14 options: True False Question 15 (1 point) Saved Listen The federal law that requires each U.S. merging bank to notify its principal federal regulatory agency and request for an approval before a merger can take place is the: Question 15 options: A)  Bank Merger Act. B)  Glass-Steagall Act. C)  Depository Institutions Deregulation and Monetary Control Act. D)  Garn-St Germain Depository Institutions Act. E)  Gramm-Leach-Bliley Act.
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