Question 1

Which of the following is a true statement?

Accepted Answer

A) Banks do not hold corporate equities because regulations prohibit it. 
B) FIs are not necessarily a predictable inflow of funds. 
C) Tax exempt FIs hold tax-exempt municipal securities. 
D) S&Ls specialize in small business loans. 
A) Banks do not hold corporate equities because regulations prohibit it. 
B) FIs are not necessarily a predictable inflow of funds. 
C) Tax exempt FIs hold tax-exempt municipal securities. 
D) S&Ls specialize in small business loans.

Question 2

For what reason do banks hold reserves?

Accepted Answer

A) to meet safety objectives 
B) to meet liquidity objectives 
C) to meet Federal Reserve requirements 
D) All of the above are correct 
A) to meet safety objectives 
B) to meet liquidity objectives 
C) to meet Federal Reserve requirements 
D) All of the above are correct

Question 3

Interest-earning checking accounts at credit unions are called which of the following?

Accepted Answer

A) time deposits 
B) interest accounts 
C) fed fund accounts 
D) share draft accounts 
A) time deposits 
B) interest accounts 
C) fed fund accounts 
D) share draft accounts

Question 4

Which of the following statements best describes a bank's capital base?

Accepted Answer

A) the value of liabilities minus the value of assets 
B) the value of assets minus the value of liabilities 
C) the value of assets minus the value of net worth 
D) the value of assets plus the value of net worth 
A) the value of liabilities minus the value of assets 
B) the value of assets minus the value of liabilities 
C) the value of assets minus the value of net worth 
D) the value of assets plus the value of net worth

Question 5

Which type of deposit allows funds to be easily transferred to a third party?

Accepted Answer

A) transaction 
B) time 
C) savings 
D) All of the above are correct. 
A) transaction 
B) time 
C) savings 
D) All of the above are correct.

Question 6

Why are financial intermediaries regulated?

Accepted Answer

A) to provide a smooth running financial system 
B) to protect the public from fraud 
C) to preserve the public's confidence in the safety and soundness of the system 
D) All of the above are correct. 
A) to provide a smooth running financial system 
B) to protect the public from fraud 
C) to preserve the public's confidence in the safety and soundness of the system 
D) All of the above are correct.

Question 7

Which of the following is not an example of a type of nondeposit liability?

Accepted Answer

A) repurchase agreements 
B) eurodollar borrowings 
C) time deposits 
D) fed funds 
A) repurchase agreements 
B) eurodollar borrowings 
C) time deposits 
D) fed funds

Question 8

The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989 did which of the following?

Accepted Answer

A) expanded the assets savings and loan associations could acquire 
B) created a new federal regulatory structure for the savings and loan industry 
C) reduced savings and loan associations required capital 
D) All of the above are correct. 
A) expanded the assets savings and loan associations could acquire 
B) created a new federal regulatory structure for the savings and loan industry 
C) reduced savings and loan associations required capital 
D) All of the above are correct.

Question 9

A depreciation of the yen could expose an FI that is holding supplies of yen to which of the following types of risk?

Accepted Answer

A) default risk 
B) interest rate risk 
C) liquidity risk 
D) exchange rate risk 
A) default risk 
B) interest rate risk 
C) liquidity risk 
D) exchange rate risk

Question 10

Which is the largest asset held by life insurance companies?

Accepted Answer

A) corporate and foreign bonds 
B) government and agency securities 
C) equities 
D) mortgages 
A) corporate and foreign bonds 
B) government and agency securities 
C) equities 
D) mortgages

Question 11

Money market mutual funds acquire funds from individual investors and pool them to purchase money market instruments such as

Accepted Answer

A) Treasury bills 
B) bank CDs 
C) initial stock offerings 
D) All of the above are correct. 
E) Both a and b are correct. 
A) Treasury bills 
B) bank CDs 
C) initial stock offerings 
D) All of the above are correct. 
E) Both a and b are correct.

Question 12

Savings and loan associations were originally known as which of the following?

Accepted Answer

A) provident Loan Societies 
B) building and loan associations 
C) continental banks 
D) loan sharks 
A) provident Loan Societies 
B) building and loan associations 
C) continental banks 
D) loan sharks

Question 13

Of the four types of financial intermediaries, which is the biggest?

Accepted Answer

A) deposit-type 
B) contractual-type 
C) investment-type 
D) finance company-type 
A) deposit-type 
B) contractual-type 
C) investment-type 
D) finance company-type

Question 14

The largest type of FI is which of the following?

Accepted Answer

A) credit unions 
B) savings associations 
C) commercial banks 
D) money market mutual funds 
A) credit unions 
B) savings associations 
C) commercial banks 
D) money market mutual funds

Question 15

Contingent claims offer insurance benefits from the unfortunate financial effects of which of the following?

Accepted Answer

A) death 
B) theft 
C) natural disasters 
D) All of the above are correct. 
A) death 
B) theft 
C) natural disasters 
D) All of the above are correct.

Question 16

FIs with a steady and predictable inflow and outflow of funds

Accepted Answer

A) hold highly liquid assets. 
B) hold more long-term and less liquid assets than intermediaries whose inflows and outflows are not as steady and predictable. 
C) are much more solvent than other intermediaries. 
D) hold many short-term assets. 
A) hold highly liquid assets. 
B) hold more long-term and less liquid assets than intermediaries whose inflows and outflows are not as steady and predictable. 
C) are much more solvent than other intermediaries. 
D) hold many short-term assets.

Question 17

Decisions FIs make about the composition of assets are

Accepted Answer

A) related to the maturity, riskiness, and liquidity of their liabilities. 
B) dissimilar to their liabilities. 
C) highly risky. 
D) highly liquid. 
A) related to the maturity, riskiness, and liquidity of their liabilities. 
B) dissimilar to their liabilities. 
C) highly risky. 
D) highly liquid.

Question 18

Contingent claims are

Accepted Answer

A) claims like commercial paper, which are issued by finance companies. 
B) claims like checkable deposits, which are contingent upon a depositor asking for his or her money back. 
C) claims defined by contract. 
D) claims defined by regulators. 
A) claims like commercial paper, which are issued by finance companies. 
B) claims like checkable deposits, which are contingent upon a depositor asking for his or her money back. 
C) claims defined by contract. 
D) claims defined by regulators.

Question 19

What functions do mutual funds perform for the public?

Accepted Answer

A) They acquire and pool funds from the public. 
B) They invest the funds in capital market instruments. 
C) They return the income received minus a management fee. 
D) All of the above are functions of mutual funds. 
A) They acquire and pool funds from the public. 
B) They invest the funds in capital market instruments. 
C) They return the income received minus a management fee. 
D) All of the above are functions of mutual funds.

Question 20

Which of the following is not a reason financial institutions are regulated?

Accepted Answer

A) to provide a smooth running financial system 
B) to make sure banks keep interest rates low 
C) to preserve the public's confidence in the safety and soundness of the system 
D) All of the above are correct. 
A) to provide a smooth running financial system 
B) to make sure banks keep interest rates low 
C) to preserve the public's confidence in the safety and soundness of the system 
D) All of the above are correct.

Exam 8: An Introduction to Financial Intermediaries and Risk

Which of the following is a true statement?

For what reason do banks hold reserves?

Interest-earning checking accounts at credit unions are called which of the following?

Which of the following statements best describes a bank's capital base?

Which type of deposit allows funds to be easily transferred to a third party?

Why are financial intermediaries regulated?

Which of the following is not an example of a type of nondeposit liability?

The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989 did which of the following?

A depreciation of the yen could expose an FI that is holding supplies of yen to which of the following types of risk?

Which is the largest asset held by life insurance companies?

Money market mutual funds acquire funds from individual investors and pool them to purchase money market instruments such as

Savings and loan associations were originally known as which of the following?

Of the four types of financial intermediaries, which is the biggest?

The largest type of FI is which of the following?

Contingent claims offer insurance benefits from the unfortunate financial effects of which of the following?

FIs with a steady and predictable inflow and outflow of funds

Decisions FIs make about the composition of assets are

Contingent claims are

What functions do mutual funds perform for the public?

Which of the following is not a reason financial institutions are regulated?

Introduction and Overview

Money and Its Role in the Economy

The Overseer: the Federal Reserve System

Financial Markets, Instruments, and Market Makers

Interest Rates and Bond Prices

The Structure of Interest Rates

Market Efficiency and the Flow of Funds Among Sectors

Commercial Banking Structure, Regulation, and Performance

Financial Innovation

Financial Instability and Strains on the Financial System

Regulation of the Banking System and the Financial Services Industry

The Debt Markets

The Stock Market

Securities Firms, Mutual Funds, and Financial Conglomerates

How Exchange Rates Are Determined

Forward, Futures, and Options Agreements

The International Financial System

The Fed, Depository Institutions, and the Money Supply Process

The Demand for Real Money Balances and Market Equilibrium

Financial Aspects of the Household, Business, Government, and Rest-Of-The-World Sectors

Aggregate Demand and Aggregate Supply

The Challenges of Monetary Policy

The Process of Monetary Policy Formation

Policy Implementation

Monetary Policy in a Globalized Financial System

Filters