Question 1

Currently (2015) J.P.Morgan Chase is the largest bank holding company in the world and operations in 60 countries.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is closely associated with credit allocation regulation?

Accepted Answer

A) Support the FI's lending to socially important sectors. 
B) Transmission of monetary policy from the Federal Reserve to the economy. 
C) Ensure the safety and soundness of the FI. 
D) Prevent discrimination in lending on the basis of age, race, sex, or income. 
E) Protect investors against abuses. 
A) Support the FI's lending to socially important sectors. 
B) Transmission of monetary policy from the Federal Reserve to the economy. 
C) Ensure the safety and soundness of the FI. 
D) Prevent discrimination in lending on the basis of age, race, sex, or income. 
E) Protect investors against abuses.

Question 3

Research shows that there is a significant reduction in risk achieved by investing in as few as 6 different securities.

Accepted Answer

A) True 
 B)False

Question 4

Benefits of cryptocurrencies and blockchain include all of the following EXCEPT:

Accepted Answer

A) Business or individuals can create financial agreements without relying on banks. 
B) Business or individuals can make financial transactions without relying on banks. 
C) Transactions among businesses or individuals will have to know each other to make financial agreements. 
D) Transaction costs among all of the participants in the economy can be reduced. 
E) Rating agencies and government bodies will not be necessary to verify identity, establish trust, or perform the critical business logic. 
A) Business or individuals can create financial agreements without relying on banks. 
B) Business or individuals can make financial transactions without relying on banks. 
C) Transactions among businesses or individuals will have to know each other to make financial agreements. 
D) Transaction costs among all of the participants in the economy can be reduced. 
E) Rating agencies and government bodies will not be necessary to verify identity, establish trust, or perform the critical business logic.

Question 5

An FI is exposed to liquidity risk because the average maturity of assets and the average maturity of liabilities are often different on the FIs balance sheet.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following measures the difference between the private costs of regulations and the private benefits of those regulations for the producers of financial services?

Accepted Answer

A) Capital adequacy. 
B) Agency costs. 
C) Net regulatory burden. 
D) Charter value. 
E) Liquidity risk. 
A) Capital adequacy. 
B) Agency costs. 
C) Net regulatory burden. 
D) Charter value. 
E) Liquidity risk.

Question 7

The passage of legislation to ensure that FIs are meeting the needs of their local communities is an example of entry regulation.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following refers to the possibility that a firm's owners or managers will take actions contrary to the promises contained in the covenants of the securities the firm issues to raise funds?

Accepted Answer

A) Liquidity risk. 
B) Price risk. 
C) Credit risk. 
D) Intermediation. 
E) Agency costs. 
A) Liquidity risk. 
B) Price risk. 
C) Credit risk. 
D) Intermediation. 
E) Agency costs.

Question 9

Which of the following groups of FIs have experienced the highest percentage growth in assets in the U.S.financial services industry during the past sixty years?

Accepted Answer

A) Commercial banks. 
B) Thrifts. 
C) Life insurance companies. 
D) Investment companies. 
E) Finance companies. 
A) Commercial banks. 
B) Thrifts. 
C) Life insurance companies. 
D) Investment companies. 
E) Finance companies.

Question 10

The standardization of many FI products is evidence of the inefficient institutionalization by financial markets and the mechanisms through which these products trade.

Accepted Answer

A) True 
 B)False

Question 11

Secondary securities are securities that serve as collateral for primary securities.

Accepted Answer

A) True 
 B)False

Question 12

Financial technology or FinTech refers to the use of technology to deliver financial solutions in a manner that competes with traditional financial methods.

Accepted Answer

A) True 
 B)False

Question 13

Many households place funds with financial institutions because many FI accounts provide

Accepted Answer

A) lower denominations than other securities. 
B) flexible maturities verses other interest-earning securities. 
C) better liquidity than directly negotiated debt contracts. 
D) less price risk if interest rates change. 
E) All of the options. 
A) lower denominations than other securities. 
B) flexible maturities verses other interest-earning securities. 
C) better liquidity than directly negotiated debt contracts. 
D) less price risk if interest rates change. 
E) All of the options.

Question 14

The efficiency with which FIs provide payment services directly benefits the economy.

Accepted Answer

A) True 
 B)False

Question 15

Because of changes in regulatory barriers, technology, and financial innovation, a single financial service firm may now be able to offer a full set of financial services.

Accepted Answer

A) True 
 B)False

Question 16

The liabilities of depository institutions are significant components of the money supply.

Accepted Answer

A) True 
 B)False

Question 17

FIs are independent market entities that create financial assets whose value is the transformation of financial risk.

Accepted Answer

A) True 
 B)False

Question 18

What is globalization?

Accepted Answer

A) The process that causes an FI to focus more intensely on their own domestic market. 
B) Acceptance of the Federal Reserve as the regulator of the world financial system. 
C) Usually refers to the initiation of GLOBEX, a new international financial communications and trading system. 
D) The evolution of markets and institutions so that geographic boundaries do not restrict financial transactions. 
E) Joint ownership of international electronic payments systems. 
A) The process that causes an FI to focus more intensely on their own domestic market. 
B) Acceptance of the Federal Reserve as the regulator of the world financial system. 
C) Usually refers to the initiation of GLOBEX, a new international financial communications and trading system. 
D) The evolution of markets and institutions so that geographic boundaries do not restrict financial transactions. 
E) Joint ownership of international electronic payments systems.

Question 19

Which of the following refers to the term "maturity intermediation"?

Accepted Answer

A) Creation of a secondary market mature enough to withstand volatility. 
B) Overcoming constraints to buying assets imposed by large minimum denomination size. 
C) Mismatching the maturities of assets and liabilities. 
D) Reducing information costs or imperfections between households and corporations. 
E) The transfer of wealth from one generation to the next. 
A) Creation of a secondary market mature enough to withstand volatility. 
B) Overcoming constraints to buying assets imposed by large minimum denomination size. 
C) Mismatching the maturities of assets and liabilities. 
D) Reducing information costs or imperfections between households and corporations. 
E) The transfer of wealth from one generation to the next.

Question 20

In what year did housing prices begin to deteriorate leading to a jump in defaults in the subprime mortgage markets and the onset of the recent financial crisis?

Accepted Answer

A) 2001. 
B) 2003. 
C) 2006. 
D) 2008. 
E) 2010. 
A) 2001. 
B) 2003. 
C) 2006. 
D) 2008. 
E) 2010.

Exam 1: Why Are Financial Institutions Special

Currently (2015) J.P.Morgan Chase is the largest bank holding company in the world and operations in 60 countries.

Which of the following is closely associated with credit allocation regulation?

Research shows that there is a significant reduction in risk achieved by investing in as few as 6 different securities.

Benefits of cryptocurrencies and blockchain include all of the following EXCEPT:

An FI is exposed to liquidity risk because the average maturity of assets and the average maturity of liabilities are often different on the FIs balance sheet.

Which of the following measures the difference between the private costs of regulations and the private benefits of those regulations for the producers of financial services?

The passage of legislation to ensure that FIs are meeting the needs of their local communities is an example of entry regulation.

Which of the following refers to the possibility that a firm's owners or managers will take actions contrary to the promises contained in the covenants of the securities the firm issues to raise funds?

Which of the following groups of FIs have experienced the highest percentage growth in assets in the U.S.financial services industry during the past sixty years?

The standardization of many FI products is evidence of the inefficient institutionalization by financial markets and the mechanisms through which these products trade.

Secondary securities are securities that serve as collateral for primary securities.

Financial technology or FinTech refers to the use of technology to deliver financial solutions in a manner that competes with traditional financial methods.

Many households place funds with financial institutions because many FI accounts provide

The efficiency with which FIs provide payment services directly benefits the economy.

Because of changes in regulatory barriers, technology, and financial innovation, a single financial service firm may now be able to offer a full set of financial services.

The liabilities of depository institutions are significant components of the money supply.

FIs are independent market entities that create financial assets whose value is the transformation of financial risk.

What is globalization?

Which of the following refers to the term "maturity intermediation"?

In what year did housing prices begin to deteriorate leading to a jump in defaults in the subprime mortgage markets and the onset of the recent financial crisis?

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Securities Brokerage and Investment Banking

Financial Services: Mutual Funds and Hedge Funds

Financial Services: Insurance

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loan Risk

Credit Risk: Loan Portfolio and Concentration Risk

Liquidity Risk

Foreign Exchange Risk

Sovereign Risk

Market Risk

Off-Balance-Sheet Risk

Technology and Other Operational Risks

Fintech Risks

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

Filters