Question 1

Which of the following is not or has not been directly regulated in the financial system?

Accepted Answer

A) the types of liabilities and assets certain intermediaries are allowed to acquire 
B) entry into the industry 
C) the geographic area in which a firm locates 
D) profits 
A) the types of liabilities and assets certain intermediaries are allowed to acquire 
B) entry into the industry 
C) the geographic area in which a firm locates 
D) profits

Question 2

The risk that banks will not be prepared to meet unexpected withdrawals by depositors or to accommodate unexpected loan demand by valued customers is which of the following?

Accepted Answer

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

Question 3

The key to growth and survival in the financial services industry is (are) the creation of new

Accepted Answer

A) financial instruments. 
B) financial markets. 
C) financial institutions. 
D) All of the above are correct. 
A) financial instruments. 
B) financial markets. 
C) financial institutions. 
D) All of the above are correct.

Question 4

Which of the following is the risk that FIs face when depositors withdraw deposits without warning?

Accepted Answer

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

Question 5

Which of the following could be characterized as a cash flow problem?

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 6

Which intermediary relies most heavily on commercial paper as a source of funds?

Accepted Answer

A) money market mutual funds 
B) finance companies 
C) insurance companies 
D) S&Ls 
A) money market mutual funds 
B) finance companies 
C) insurance companies 
D) S&Ls

Question 7

__________ are deposits that have a scheduled maturity and a penalty for early withdrawal.

Accepted Answer

A) Contingent claims 
B) Savings deposits 
C) Time deposits 
D) Transactions deposits 
A) Contingent claims 
B) Savings deposits 
C) Time deposits 
D) Transactions deposits

Question 8

__________ is the risk that the FI will be required to make a payment when the intermediary has only long-term assets that cannot be disposed of quickly without a capital loss.

Accepted Answer

A) Default risk 
B) Exchange rate risk 
C) Interest rate risk 
D) Liquidity risk 
A) Default risk 
B) Exchange rate risk 
C) Interest rate risk 
D) Liquidity risk

Question 9

When interest rates fluctuate widely, FIs react by utilizing which of the following?

Accepted Answer

A) financial futures 
B) swaps 
C) options 
D) All of the above are used. 
A) financial futures 
B) swaps 
C) options 
D) All of the above are used.

Question 10

The balance sheet identity is which of the following?

Accepted Answer

A) Assets equal net worth minus liabilities. 
B) Net worth equals assets plus the income statement. 
C) Assets equal liabilities plus net worth. 
D) Liabilities equal net worth minus assets. 
A) Assets equal net worth minus liabilities. 
B) Net worth equals assets plus the income statement. 
C) Assets equal liabilities plus net worth. 
D) Liabilities equal net worth minus assets.

Question 11

Money market deposit accounts offer which of the following?

Accepted Answer

A) limited check-writing privileges 
B) higher interest than other checkable deposits 
C) Both of the above are correct. 
D) None of the above is correct. 
A) limited check-writing privileges 
B) higher interest than other checkable deposits 
C) Both of the above are correct. 
D) None of the above is correct.

Question 12

A moral hazard problem occurs when

Accepted Answer

A) the borrower uses falsified identification. 
B) the borrower engages in a riskier venture than what the borrowed funds were intended for. 
C) there is an increase in default. 
D) there is a decrease in default. 
A) the borrower uses falsified identification. 
B) the borrower engages in a riskier venture than what the borrowed funds were intended for. 
C) there is an increase in default. 
D) there is a decrease in default.

Question 13

Which of the following provide protection against unexpected occurrences to homes and automobiles in exchange for paid premiums?

Accepted Answer

A) pension funds 
B) casualty companies 
C) life insurance companies 
D) All of the above are correct. 
A) pension funds 
B) casualty companies 
C) life insurance companies 
D) All of the above are correct.

Question 14

Savings and loan associations were first founded in the

Accepted Answer

A) early 1700s. 
B) early 1830s. 
C) late 1870s. 
D) late 1920s. 
A) early 1700s. 
B) early 1830s. 
C) late 1870s. 
D) late 1920s.

Question 15

The largest source of funds for commercial banks is which of the following?

Accepted Answer

A) loans 
B) Borrowings from the Fed 
C) deposits 
D) nondeposit liabilities 
A) loans 
B) Borrowings from the Fed 
C) deposits 
D) nondeposit liabilities

Question 16

Which depository institution is not considered a thrift?

Accepted Answer

A) S&Ls 
B) savings banks 
C) commercial banks 
D) credit unions 
A) S&Ls 
B) savings banks 
C) commercial banks 
D) credit unions

Question 17

Beneficial Finance, The General Motors Acceptance Corporation, and Household Finance Corporation are all examples of which type of FI?

Accepted Answer

A) investment 
B) finance 
C) contractual 
D) depository institution 
A) investment 
B) finance 
C) contractual 
D) depository institution

Question 18

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

Accepted Answer

A) savings associations 
B) national thrift leagues 
C) continental banks 
D) building and loan associations 
A) savings associations 
B) national thrift leagues 
C) continental banks 
D) building and loan associations

Question 19

The assets of S&Ls are ______________________those of savings banks.

Accepted Answer

A) much larger than 
B) about the same as 
C) much smaller than 
D) much more volatile than 
A) much larger than 
B) about the same as 
C) much smaller than 
D) much more volatile than

Question 20

Which of the following statements about balance sheets is false?

Accepted Answer

A) Balance sheets present the monetary value of a change in an economic unit's assets, liabilities, and net worth over a particular period of time, say one year. 
B) The fundamental balance sheet identity is that assets equal liabilities plus net worth. 
C) Balance sheets present the monetary value of an economic unit's assets, liabilities, and net worth. 
D) If the value of liabilities is greater than the value of assets, net worth is negative. 
A) Balance sheets present the monetary value of a change in an economic unit's assets, liabilities, and net worth over a particular period of time, say one year. 
B) The fundamental balance sheet identity is that assets equal liabilities plus net worth. 
C) Balance sheets present the monetary value of an economic unit's assets, liabilities, and net worth. 
D) If the value of liabilities is greater than the value of assets, net worth is negative.

Exam 8: An Introduction to Financial Intermediaries and Risk

Which of the following is not or has not been directly regulated in the financial system?

The risk that banks will not be prepared to meet unexpected withdrawals by depositors or to accommodate unexpected loan demand by valued customers is which of the following?

The key to growth and survival in the financial services industry is (are) the creation of new

Which of the following is the risk that FIs face when depositors withdraw deposits without warning?

Which of the following could be characterized as a cash flow problem?

Which intermediary relies most heavily on commercial paper as a source of funds?

__________ are deposits that have a scheduled maturity and a penalty for early withdrawal.

__________ is the risk that the FI will be required to make a payment when the intermediary has only long-term assets that cannot be disposed of quickly without a capital loss.

When interest rates fluctuate widely, FIs react by utilizing which of the following?

The balance sheet identity is which of the following?

Money market deposit accounts offer which of the following?

A moral hazard problem occurs when

Which of the following provide protection against unexpected occurrences to homes and automobiles in exchange for paid premiums?

Savings and loan associations were first founded in the

The largest source of funds for commercial banks is which of the following?

Which depository institution is not considered a thrift?

Beneficial Finance, The General Motors Acceptance Corporation, and Household Finance Corporation are all examples of which type of FI?

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

The assets of S&Ls are ______________________those of savings banks.

Which of the following statements about balance sheets is false?

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