Question 1

The law of large numbers allows insurance companies to

Accepted Answer

A) hold capital market instruments as assets without fearing overly large numbers of defaults. 
B) hold money market instruments as assets without fearing overly large numbers of defaults. 
C) predict the average number of occurrences of insurable events in a large population of policyholders. 
D) charge higher premiums than necessary, knowing that large numbers of individuals will pay them. 
A) hold capital market instruments as assets without fearing overly large numbers of defaults. 
B) hold money market instruments as assets without fearing overly large numbers of defaults. 
C) predict the average number of occurrences of insurable events in a large population of policyholders. 
D) charge higher premiums than necessary, knowing that large numbers of individuals will pay them.

Question 2

What do many analysts see finance companies as having an advantage in?

Accepted Answer

A) In purchasing commercial paper 
B) In selling long-term securities 
C) In monitoring the value of collateral 
D) In charging consumers particularly low interest rates 
A) In purchasing commercial paper 
B) In selling long-term securities 
C) In monitoring the value of collateral 
D) In charging consumers particularly low interest rates

Question 3

The growth in self-directed retirement accounts (such as IRAs and 401(k) plans)

Accepted Answer

A) caused a decline in the total assets of mutual funds. 
B) helped increase the growth in mutual funds. 
C) led to a decline in stock prices relative to bond prices. 
D) went almost entirely unregulated by the federal government. 
A) caused a decline in the total assets of mutual funds. 
B) helped increase the growth in mutual funds. 
C) led to a decline in stock prices relative to bond prices. 
D) went almost entirely unregulated by the federal government.

Question 4

The largest category of mutual funds is

Accepted Answer

A) money market mutual funds. 
B) closed-end mutual funds. 
C) load funds. 
D) funds consisting of capital market instruments. 
A) money market mutual funds. 
B) closed-end mutual funds. 
C) load funds. 
D) funds consisting of capital market instruments.

Question 5

All of the following statements about junk bonds are true EXCEPT

Accepted Answer

A) they tend to be underwritten by merchant banks. 
B) their ratings by Moody's is Baa or less. 
C) their ratings by Standard & Poor's is BBB or less. 
D) they are riskier than other bonds. 
A) they tend to be underwritten by merchant banks. 
B) their ratings by Moody's is Baa or less. 
C) their ratings by Standard & Poor's is BBB or less. 
D) they are riskier than other bonds.

Question 6

Which of the following statements is NOT true of consumer finance companies?

Accepted Answer

A) Their borrowers have higher default risk than bank customers. 
B) They charge higher interest rates than banks do on similar loans. 
C) They lend primarily to consumers. 
D) They are strictly regulated by state governments. 
A) Their borrowers have higher default risk than bank customers. 
B) They charge higher interest rates than banks do on similar loans. 
C) They lend primarily to consumers. 
D) They are strictly regulated by state governments.

Question 7

A load fund

Accepted Answer

A) charges a commission for purchases or sales. 
B) is not obligated to redeem shares issued. 
C) earns income only from management fees. 
D) issues shares that may sell at a discount to the market value of the underlying assets. 
A) charges a commission for purchases or sales. 
B) is not obligated to redeem shares issued. 
C) earns income only from management fees. 
D) issues shares that may sell at a discount to the market value of the underlying assets.

Question 8

Which of the following is NOT true of exchanges?

Accepted Answer

A) Securities are bought and sold in one physical location. 
B) Securities are sold in an auction market. 
C) The NYSE is an exchange. 
D) The NASDAQ is an exchange. 
A) Securities are bought and sold in one physical location. 
B) Securities are sold in an auction market. 
C) The NYSE is an exchange. 
D) The NASDAQ is an exchange.

Question 9

All of the following are types of finance companies EXCEPT

Accepted Answer

A) government finance. 
B) consumer finance. 
C) sales finance. 
D) business finance. 
A) government finance. 
B) consumer finance. 
C) sales finance. 
D) business finance.

Question 10

In which of the following have pension funds invested the most?

Accepted Answer

A) Corporate equities and mutual fund shares 
B) Government securities 
C) Corporate bonds 
D) Mortgages 
A) Corporate equities and mutual fund shares 
B) Government securities 
C) Corporate bonds 
D) Mortgages

The law of large numbers allows insurance companies to

What do many analysts see finance companies as having an advantage in?

The growth in self-directed retirement accounts (such as IRAs and 401(k) plans)

The largest category of mutual funds is

All of the following statements about junk bonds are true EXCEPT

Which of the following statements is NOT true of consumer finance companies?

A load fund

Which of the following is NOT true of exchanges?

All of the following are types of finance companies EXCEPT

In which of the following have pension funds invested the most?

Introducing Money and the Financial System

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

Banking in the International Economy

The Money Supply Process

Changes in the Monetary Base

Organization of Central Banks

Monetary Policy Tools

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

The Demand for Money

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Aggregate Demand and Aggregate Supply

Money and Output in the Short Run

Information Problems and Channels for Monetary Policy

Inflation: Causes and Consequences

Filters

Exam 12: What Financial Institutions Do

The law of large numbers allows insurance companies to

What do many analysts see finance companies as having an advantage in?

The growth in self-directed retirement accounts (such as IRAs and 401(k) plans)

The largest category of mutual funds is

All of the following statements about junk bonds are true EXCEPT

Which of the following statements is NOT true of consumer finance companies?

A load fund

Which of the following is NOT true of exchanges?

All of the following are types of finance companies EXCEPT

In which of the following have pension funds invested the most?

Introducing Money and the Financial System

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

Banking in the International Economy

The Money Supply Process

Changes in the Monetary Base

Organization of Central Banks

Monetary Policy Tools

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

The Demand for Money

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Aggregate Demand and Aggregate Supply

Money and Output in the Short Run

Information Problems and Channels for Monetary Policy

Inflation: Causes and Consequences

Filters