Pricing Institute Exam

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Pricing Institute
Course Exam

THE PRICING INSTITUTE Post Test

This is the Pricing Post Test required to be taken by all attendees of the Moebs $ervices, Inc. The Pricing Institute. The results of this test will be figured into your personal PI score and the PI score of your team.

Good Luck!

Multiple Choice Select One

1. Financial service pricing is unique because:

Multiple Choice Select One

a. You can pay with compensating balances
b. Financial institutions can create money
c. There is a time value to money
d. All of the above
e. None of the above

Multiple choice please select one

2. Strategic execution of pricing is most closely related to which business function?

Multiple choice please select one

a. Marketing
b. Economics
c. Pricing Theory
d. All of the above
e. None of the above

Multiple choice Select one

3. Marketing is a multi-discipline function which includes:

Multiple choice Select one

a. Pricing
b. Product or service design
c. Promotion
d. Placing of the product/service in distribution
e. All of the above

Multiple choice please select one answer

4. Which is the most important use of pricing – growth or efficiency?

Multiple choice please select one answer

a. Growth
b. Efficiency
c. Both
d. Neither

Select one

5. Loan pricing is an example of:

Select one

a. The demand side of the supply and demand curves
b. The supply side of the supply and demand curves
c. Both the supply and demand sides of the supply and demand curve
d. Equilibrium between supply and demand
e. None of the above

Multiple choice select one

6. Deposit pricing is an example of:

Multiple choice select one

a. The demand side of the supply and demand curves
b. The supply side of the supply and demand curves
c. Both the supply and demand sides of the supply and demand curve
d. Equilibrium between supply and demand
e. None of the above

Multiple choice select one

7. Tiering within a single service for a deposit account works for which of the following:

Multiple choice select one

a. High prices
b. Low cost
c. Low relationship
d. All of the above
e. None of the above

Multiple choice select one

8. A home equity loan is priced at 8.0% and funded with a deposit account at 5.0%; the difference is:

Multiple choice select one

a. Net interest margin
b. Loan Spread
c. Both net interest margin and loan spread
d. None of the above

Multiple choice select one

9. Minimally Net Interest Margin is calculated as Gross Interest Revenue less Gross Interest Expense.

Multiple choice select one

a. True
b. False

Multiple choice select one

10. Which of the following is/are necessary to equate or convert a fee to a balance?

Multiple choice select one

a. The fee or price
b. An annualization factor to make sure all terms are the same
c. A rate (cost of funds)
d. Adjustments, i.e., reserve requirements, float, non-earning assets, etc.
e. All the above

Multiple choice select one

11. When is the best time to change pricing on a transaction account?

Multiple choice select one

a. A period of rising rates
b. A period of falling rates
c. Beginning of First Quarter
d. Beginning of Third Quarter
e. None of the above

Multiple choice select one

12. Which one of these CDs (1 or 2) has a better annual percentage yield (APY) for the consumer? - (1) $1,000 CD for one year at 3.50%, interest compounded monthly, or (2) A CD purchased for $965.65 which will mature for $1,000 in one year.

Multiple choice select one

a. (1)
b. (2)
c. Cannot compare
d. They are the same

Multiple choice select one

13. With line of credit loans, which portfolio is more financially effective?

Multiple choice select one

a. 100 lines of credit with 50 having balances
b. 50 lines of credit with 50 having balances

Multiple choice select one

14. By Federal regulation, the early withdrawal penalty on a 6-month certificate of deposit is:

Multiple choice select one

a. 7 days loss of interest
b. 30 days loss of interest
c. 60 days loss of interest
d. 90 days loss of interest
e. None of the above

Multiple choice select one

15. The role of price is:

Multiple choice select one

a. Transmission of information
b. Incentives
c. Distribution of income
d. All of the above

Multiple choice select one

16. Friction, or rate cost without enough revenue, in financial services can be caused by:

Multiple choice select one

a. Float
b. Non-earning assets
c. Currency and coin in the financial institution’s vault
d. All of the above

Multiple choice select one

17. Optimal opportunities for a depository occur when which of the following conditions exist:

Multiple choice select one

a. Large net interest margin caused by high interest earned and low interest paid
b. Low non-interest expenses
c. High fee income
d. All of the above

Multiple choice select one

18. The most difficult financial service to price is:

Multiple choice select one

a. Loans
b. T-Accts
c. Savings
d. Money market accounts

Multiple choice select one

19. Which is the best way to pay for a financial service?

Multiple choice select one

a. Fee
b. Rate
c. Balance
d. All of the above

Multiple choice select one

20. Which of the following factors is not necessary for a successful pricing strategy?

Multiple choice select one

a. Targeted Marketing
b. High Efficiency
c. Active Price Management
d. Strategic Orientation
e. None of the above

Multiple choice select one

21. Which field of economics helps in understanding pricing the best?

Multiple choice select one

a. Macroeconomics
b. Microeconomics
c. Economic Solutions
d. All of the above

Multiple choice select one

22. To price relationships properly, which level of relationship is best for pricing purposes?

Multiple choice select one

a. Account holder/owner
b. Customer/Member/Subsidiary
c. Household/Parent Company
d. All of the above

Multiple choice select one

23. The key component(s) of user risk is/are:

Multiple choice select one

a. Disclosure
b. Transparency
c. Consent
d. All of the above

Multiple choice select one

24. Automatic decisioning in financial services, or what some call credit scoring, is driven by:

Multiple choice select one

a. Expense Control
b. Distribution of decisioning
c. Control of Loss
d. All of the above

Multiple choice select one

25. Most of the costs for financial services are:

Multiple choice select one

a. Variable
b. Fixed
c. Semi-variable
d. All of the above

Multiple Choice Select One

26. Direct costing considers labor and material while absorption costing considers everything including labor, material, and overhead. Which costing approach is best for pricing purposes in the long-term?

Multiple Choice Select One

a. Direct costing
b. Absorption costing
c. Both
d. Neither

Multiple choice please select one

27. Which of the following transactions has the largest volume today?

Multiple choice please select one

a. Paper Checks
b. Credit Cards
c. Debit Cards
d. Automated Clearing House transactions (ACH)
e. None of the above

Multiple choice Select one

28. Determine how increasing Fees will effect balances.

Multiple choice Select one

a. Increase
b. Decrease

Multiple choice please select one answer

29. Determine how decreasing rate, or interest paid or earnings credit, will affect balances.

Multiple choice please select one answer

a. Increase
b. Decrease

Please select one

30. Determine how increasing adjustments, i.e., reserves, etc. will affect balances.

Please select one

a. Increase
b. Decrease

Multiple choice select one

31. Determine how decreasing Fees will effect balances.

Multiple choice select one

a. Increase
b. Decrease

Multiple choice select one

32. Determine how increasing rate, or interest paid or earnings credit, will affect balances.

Multiple choice select one

a. Increase
b. Decrease

Multiple choice select one

33. Determine how decreasing Adjustments for Reserves, etc. will effect balances.

Multiple choice select one

a. Increase
b. Decrease

Please list each strategic element on a separate line.

34 – 41. In any order, list the eight strategic elements that determine price.

Please list each strategic element on a separate line.

True or False

42. Pricing theory is a function of economics.

True or False

a. True
b. False

Troe or False

43. Pricing is both an art and a science.

Troe or False

a. True
b. False

True or False

44. Successful pricing is driven by options with incentives for both buyer and seller.

True or False

a. True
b. False

True or False

45. A high price fee or loan service has few competitors.

True or False

a. True
b. False

True or False

46. In financial services: the price is the service and the service is price.

True or False

a. True
b. False

True or False

47. Toasters and stuffed animal premiums are very profitable for depositories.

True or False

a. True
b. False

Multiple choice select one

48. Being the most efficient allows your institution to have the most competitive prices.

Multiple choice select one

a. True
b. False

True or False

49. When a financial institution achieves economy of scale, the strategic direction should be growth.

True or False

a. True
b. False

True or False

50. Only large asset size financial institutions can achieve the economy of scale.

True or False

a. True
b. False

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