Question 1

Most finance companies specialize in one of three loan types. Which of the following is not one of those three types?

Accepted Answer

A)  Consumer loans for purchases such as appliances 
B)  Margin loans for buying stock 
C)  Sales loans for purchases such as cars 
D)  Business loans for firms to use to buy new equipment 
A)  Consumer loans for purchases such as appliances 
B)  Margin loans for buying stock 
C)  Sales loans for purchases such as cars 
D)  Business loans for firms to use to buy new equipment

Question 2

Unit banks are:

Accepted Answer

A)  banks with no branches. 
B)  more numerous in the United States than they were in previous decades. 
C)  no longer permitted to exist in the United States. 
D)  commercial banks that have combined into one unit with an investment bank. 
A)  banks with no branches. 
B)  more numerous in the United States than they were in previous decades. 
C)  no longer permitted to exist in the United States. 
D)  commercial banks that have combined into one unit with an investment bank.

Question 3

Which of the following is an example of the economies of scale argument for increased profits for large financial holding companies?

Accepted Answer

A)  Financial holding companies offer a wide array of services under one name. 
B)  Financial holding companies need only one CEO, one Board of Directors, and one accounting system regardless of size. 
C)  Financial holding companies are well diversified so risk is reduced. 
D)  The profitability of financial holding companies does not rely on one particular line of business. 
A)  Financial holding companies offer a wide array of services under one name. 
B)  Financial holding companies need only one CEO, one Board of Directors, and one accounting system regardless of size. 
C)  Financial holding companies are well diversified so risk is reduced. 
D)  The profitability of financial holding companies does not rely on one particular line of business.

Question 4

Universal banks are:

Accepted Answer

A)  firms that engage in banking services across many countries. 
B)  firms that engage a wide array of financial and non-financial activities. 
C)  banks that make direct investment in non-financial firms. 
D)  multinational corporations that own U.S. banks. 
A)  firms that engage in banking services across many countries. 
B)  firms that engage a wide array of financial and non-financial activities. 
C)  banks that make direct investment in non-financial firms. 
D)  multinational corporations that own U.S. banks.

Question 5

Fannie Mae, Ginnie Mae, and Freddie Mac are examples of:

Accepted Answer

A)  private regulatory bodies that supervise home mortgage lenders. 
B)  government-sponsored enterprises chartered to encourage home lending. 
C)  government-sponsored enterprises that were chartered to encourage small business loans. 
D)  government-sponsored enterprises that provide homeowners insurance to people that cannot obtain it from private insurers. 
A)  private regulatory bodies that supervise home mortgage lenders. 
B)  government-sponsored enterprises chartered to encourage home lending. 
C)  government-sponsored enterprises that were chartered to encourage small business loans. 
D)  government-sponsored enterprises that provide homeowners insurance to people that cannot obtain it from private insurers.

Question 6

In the early years of the Great Depression, 1929-1933:

Accepted Answer

A)  over one half of all U.S. banks failed. 
B)  two-thirds of U.S. banks failed. 
C)  more than a third of all U.S. banks failed. 
D)  a little less than one-quarter of U.S. banks failed. 
A)  over one half of all U.S. banks failed. 
B)  two-thirds of U.S. banks failed. 
C)  more than a third of all U.S. banks failed. 
D)  a little less than one-quarter of U.S. banks failed.

Question 7

In a defined-contribution plan:

Accepted Answer

A)  only the employee makes contributions into the fund. 
B)  the retirement benefits will vary with both the amount contributed and the performance of the fund. 
C)  the benefits are determined mainly by years of service. 
D)  no vesting is required; employees are eligible for benefits from the time they make their first contribution. 
A)  only the employee makes contributions into the fund. 
B)  the retirement benefits will vary with both the amount contributed and the performance of the fund. 
C)  the benefits are determined mainly by years of service. 
D)  no vesting is required; employees are eligible for benefits from the time they make their first contribution.

Question 8

Vesting can make job changes costly because:

Accepted Answer

A)  you may not be able to take your entire pension benefit from your previous job with you. 
B)  once you leave one job fully vested the only other pension you can be eligible for is Social Security. 
C)  you can only become fully vested in one company's pension. 
D)  vested employees earn higher returns on their funds. 
A)  you may not be able to take your entire pension benefit from your previous job with you. 
B)  once you leave one job fully vested the only other pension you can be eligible for is Social Security. 
C)  you can only become fully vested in one company's pension. 
D)  vested employees earn higher returns on their funds.

Question 9

Explain why the decoding of the human genome has interesting implications for the life insurance industry.

Accepted Answer

The decoding of the human genome will ma

Question 10

Prior to the Civil War most state banks issued their own banknotes. This resulted in all of the following problems except:

Accepted Answer

A)  their values decreased as the holder moved further from the bank. 
B)  they were worthless if the bank failed. 
C)  they were not efficient as a means of payment if the holder was far from the bank. 
D)  they were usually redeemable in gold. 
A)  their values decreased as the holder moved further from the bank. 
B)  they were worthless if the bank failed. 
C)  they were not efficient as a means of payment if the holder was far from the bank. 
D)  they were usually redeemable in gold.

Question 11

Insurance companies can predict fairly accurately:

Accepted Answer

A)  the percentage of policyholders who will have a claim and which policyholders will have a claim. 
B)  which policyholders will suffer a loss but not the percentage of policyholders that will do so. 
C)  the type of losses policyholders will incur but not the percentage of policyholders that will file claims. 
D)  the percentage of policyholders that will file claims but not the policyholders that will file them. 
A)  the percentage of policyholders who will have a claim and which policyholders will have a claim. 
B)  which policyholders will suffer a loss but not the percentage of policyholders that will do so. 
C)  the type of losses policyholders will incur but not the percentage of policyholders that will file claims. 
D)  the percentage of policyholders that will file claims but not the policyholders that will file them.

Question 12

The bank failures that occurred during the early years of the Great Depression:

Accepted Answer

A)  hurt large depositors the most since it was the large money center banks that failed. 
B)  hurt small depositors the most since it was mainly small banks that failed. 
C)  hurt the government insurance funds since FDIC covered most of the losses of depositors. 
D)  totaled about 30% of total bank customer deposits. 
A)  hurt large depositors the most since it was the large money center banks that failed. 
B)  hurt small depositors the most since it was mainly small banks that failed. 
C)  hurt the government insurance funds since FDIC covered most of the losses of depositors. 
D)  totaled about 30% of total bank customer deposits.

Question 13

The Glass-Steagall Act of 1933:

Accepted Answer

A)  required commercial banks to sell off their investment banking operations. 
B)  eliminated the FDIC. 
C)  required federally chartered banks to meet the branching restrictions of the states. 
D)  required all state banks to get federal charters. 
A)  required commercial banks to sell off their investment banking operations. 
B)  eliminated the FDIC. 
C)  required federally chartered banks to meet the branching restrictions of the states. 
D)  required all state banks to get federal charters.

Question 14

The main difference between sales finance and consumer finance is:

Accepted Answer

A)  the type of borrower. 
B)  the size of the purchase involved. 
C)  the length of time until the loan has to be repaid. 
D)  one deals with equipment leasing and the other does not. 
A)  the type of borrower. 
B)  the size of the purchase involved. 
C)  the length of time until the loan has to be repaid. 
D)  one deals with equipment leasing and the other does not.

Question 15

Often Eurodollar deposits earn higher returns than U.S. bank deposits for all of the following reasons except:

Accepted Answer

A)  Eurodollar deposits are not subject to U.S. reserve requirements. 
B)  the bank does not have to pay deposit insurance premiums on these deposits. 
C)  regulatory compliance may be more costly for a foreign bank than a U.S. bank. 
D)  taxes on the profits on banks outside the U.S. may be lower on banks inside the U.S. 
A)  Eurodollar deposits are not subject to U.S. reserve requirements. 
B)  the bank does not have to pay deposit insurance premiums on these deposits. 
C)  regulatory compliance may be more costly for a foreign bank than a U.S. bank. 
D)  taxes on the profits on banks outside the U.S. may be lower on banks inside the U.S.

Question 16

Which of the following statements most accurately describes the state of banking in the U.S.?

Accepted Answer

A)  A large number of large banks and a small number of small banks 
B)  A large number of large and small banks 
C)  A small number of large and small banks 
D)  A large number of small banks and a small number of large banks 
A)  A large number of large banks and a small number of small banks 
B)  A large number of large and small banks 
C)  A small number of large and small banks 
D)  A large number of small banks and a small number of large banks

Question 17

Why do you think most health insurance policies require the first $100 or so of every claim and a percentage of the bill after that to be paid by the insured?

Accepted Answer

This is to treat the moral hazard proble

Question 18

It has been argued that the laws that prohibited branch banking were needed to protect consumers from large monopoly banks. Does that argument hold up to close scrutiny? Explain.

Accepted Answer

Actually, the laws may have created more

Question 19

The main risk that investment banks face from their underwriting services is:

Accepted Answer

A)  the client will not pay for the service. 
B)  the company issuing the securities will go bankrupt. 
C)  the price investors pay for the security is less than the guaranteed price to the issuing firm. 
D)  the price paid by investors exceeds the guaranteed price to the issuing firm. 
A)  the client will not pay for the service. 
B)  the company issuing the securities will go bankrupt. 
C)  the price investors pay for the security is less than the guaranteed price to the issuing firm. 
D)  the price paid by investors exceeds the guaranteed price to the issuing firm.

Question 20

The growth of international banking has:

Accepted Answer

A)  decreased the competition that domestic banks face. 
B)  decreased the efficiency of most banks. 
C)  enhanced economic growth in many countries. 
D)  increased the monopoly power of most banks. 
A)  decreased the competition that domestic banks face. 
B)  decreased the efficiency of most banks. 
C)  enhanced economic growth in many countries. 
D)  increased the monopoly power of most banks.

Exam 13:Financial Industry Structure

Most finance companies specialize in one of three loan types. Which of the following is not one of those three types?

Unit banks are:

Which of the following is an example of the economies of scale argument for increased profits for large financial holding companies?

Universal banks are:

Fannie Mae, Ginnie Mae, and Freddie Mac are examples of:

In the early years of the Great Depression, 1929-1933:

In a defined-contribution plan:

Vesting can make job changes costly because:

Explain why the decoding of the human genome has interesting implications for the life insurance industry.

Prior to the Civil War most state banks issued their own banknotes. This resulted in all of the following problems except:

Insurance companies can predict fairly accurately:

The bank failures that occurred during the early years of the Great Depression:

The Glass-Steagall Act of 1933:

The main difference between sales finance and consumer finance is:

Often Eurodollar deposits earn higher returns than U.S. bank deposits for all of the following reasons except:

Which of the following statements most accurately describes the state of banking in the U.S.?

Why do you think most health insurance policies require the first $100 or so of every claim and a percentage of the bill after that to be paid by the insured?

It has been argued that the laws that prohibited branch banking were needed to protect consumers from large monopoly banks. Does that argument hold up to close scrutiny? Explain.

The main risk that investment banks face from their underwriting services is:

The growth of international banking has:

An Introduction to Money and the Financial System

Money and the Payments System

Financial Instruments, Financial Markets, and Financial Institutions

Future Value, Present Value and Interest Rates

Understanding Risk

Bonds, Bond Prices, and the Determination of Interest Rates

The Risk and Term Structure of Interest Rates

Stocks, Stock Markets and Market Efficiency

Derivatives: Futures, Options, and Swaps

Foreign Exchange

The Economics of Financial Intermediation

Depository Institutions: Banks and Bank Management

Regulating the Financial System

Central Banks in the World Today

The Structure of Central Banks: The Federal Reserve and the European Central Bank

The Central Bank Balance Sheet and the Money Supply Process

Monetary Policy: Stabilizing the Domestic Economy

Exchange Rate Policy and the Central Bank

Money Growth, Money Demand and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Understanding Business Cycle Fluctuations

Modern Monetary Policy and the Challenges Facing Central Bankers

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