Question 1

The specialty of Lloyd's of London is

Accepted Answer

A) annuities. 
B) hedge funds. 
C) mutual funds. 
D) reinsurance. 
A) annuities. 
B) hedge funds. 
C) mutual funds. 
D) reinsurance. D

Question 2

Allowing individuals to manage a portion of their Social Security funds is

Accepted Answer

A) socialization. 
B) privatization. 
C) democratization. 
D) regeneration. 
A) socialization. 
B) privatization. 
C) democratization. 
D) regeneration. B

Question 3

Several features distinguish hedge funds from traditional mutual funds,including

Accepted Answer

A) mutual funds have a minimum investment requirement of $1,000 or more;hedge funds have no minimum investment requirement. 
B) hedge funds typically charge investors large fees relative to mutual funds. 
C) hedge fund investors need not commit their money for more than a few weeks at a time,explaining why they pay higher fees. 
D) hedge funds are significantly less risky relative to mutual funds. 
A) mutual funds have a minimum investment requirement of $1,000 or more;hedge funds have no minimum investment requirement. 
B) hedge funds typically charge investors large fees relative to mutual funds. 
C) hedge fund investors need not commit their money for more than a few weeks at a time,explaining why they pay higher fees. 
D) hedge funds are significantly less risky relative to mutual funds. B

Question 4

A type of investment fund that makes long-term investments in companies that are not publicly traded is called a

Accepted Answer

A) private equity fund. 
B) hedge fund. 
C) sovereign wealth fund. 
D) brokerage fund. 
A) private equity fund. 
B) hedge fund. 
C) sovereign wealth fund. 
D) brokerage fund.

Question 5

When those most likely to produce the outcome insured against are the ones who purchase insurance,insurance companies are said to face the problem of

Accepted Answer

A) fraudulent claims. 
B) moral hazard. 
C) adverse selection. 
D) pecuniary purchases. 
A) fraudulent claims. 
B) moral hazard. 
C) adverse selection. 
D) pecuniary purchases.

Question 6

In recent years,bank regulatory authorities have

Accepted Answer

A) encouraged banks to enter the insurance field. 
B) discouraged banks from entering the insurance field. 
C) asked Congress to write new legislation that would make it illegal for banks to enter the insurance field. 
D) asked Congress to write new legislation that would make it legal for banks to enter the insurance field. 
A) encouraged banks to enter the insurance field. 
B) discouraged banks from entering the insurance field. 
C) asked Congress to write new legislation that would make it illegal for banks to enter the insurance field. 
D) asked Congress to write new legislation that would make it legal for banks to enter the insurance field.

Question 7

The key factor causing life insurance companies to move into the management of pension funds was

Accepted Answer

A) the investment expertise of insurance companies. 
B) a request for this change by managers of pension funds. 
C) a change in state laws. 
D) a change in federal legislation in 1974 to encourage pension funds to turn fund management over to life insurance companies. 
A) the investment expertise of insurance companies. 
B) a request for this change by managers of pension funds. 
C) a change in state laws. 
D) a change in federal legislation in 1974 to encourage pension funds to turn fund management over to life insurance companies.

Question 8

Fraudulent practices and other abuses of private pension funds led Congress to enact the

Accepted Answer

A) FDIC Act. 
B) Federal Reserve Act. 
C) FHLBS. 
D) Employee Retirement Income Security Act. 
A) FDIC Act. 
B) Federal Reserve Act. 
C) FHLBS. 
D) Employee Retirement Income Security Act.

Question 9

In the case of an insurance policy,________ occurs when the existence of insurance encourages the insured party to take risks that increase the likelihood of an insurance payoff;________ occurs when those most likely to get large insurance payoffs are the ones who want to purchase insurance the most.

Accepted Answer

A) moral hazard;insurance market discrimination 
B) moral hazard;insurance segregation 
C) moral hazard;adverse selection 
D) adverse selection;moral hazard 
A) moral hazard;insurance market discrimination 
B) moral hazard;insurance segregation 
C) moral hazard;adverse selection 
D) adverse selection;moral hazard

Question 10

Which of the following is true of life insurance companies?

Accepted Answer

A) Typically the type of assets that life insurance companies hold are corporate bonds,commercial mortgages,and corporate stock. 
B) The two typical forms of life insurance polices that are held can be classified as whole and variable life policies. 
C) The major risk that life insurance companies face is that payouts to policy holders are very hard to predict. 
D) Life insurance companies have suffered from wide spread failures. 
A) Typically the type of assets that life insurance companies hold are corporate bonds,commercial mortgages,and corporate stock. 
B) The two typical forms of life insurance polices that are held can be classified as whole and variable life policies. 
C) The major risk that life insurance companies face is that payouts to policy holders are very hard to predict. 
D) Life insurance companies have suffered from wide spread failures.

Question 11

The government corporation that insures pension benefits is

Accepted Answer

A) Fannie Mae. 
B) Ginnie Mae. 
C) Penny Benny. 
D) Sallie Mae. 
A) Fannie Mae. 
B) Ginnie Mae. 
C) Penny Benny. 
D) Sallie Mae.

Question 12

Adverse selection occurs when those ________ likely to get ________ insurance payoffs are the ones who want to purchase insurance the most.

Accepted Answer

A) least;large 
B) least;small 
C) most;large 
D) most;small 
A) least;large 
B) least;small 
C) most;large 
D) most;small

Question 13

The higher the insurance coverage,the ________ the policyholder can gain from risky activities that make an insurance payoff ________ likely.

Accepted Answer

A) more;less 
B) more;more 
C) less;less 
D) less;more 
A) more;less 
B) more;more 
C) less;less 
D) less;more

Question 14

Loans made to consumers by finance companies are typically

Accepted Answer

A) only for the purchase of cars or boats. 
B) at interest rates below those charged by banks for the same type of loan. 
C) at interest rates above those charged by banks for the same type of loan. 
D) not made for less than $10,000. 
A) only for the purchase of cars or boats. 
B) at interest rates below those charged by banks for the same type of loan. 
C) at interest rates above those charged by banks for the same type of loan. 
D) not made for less than $10,000.

Question 15

In financial markets,when a firm issues stock for the first time it is called an

Accepted Answer

A) investment portfolio option. 
B) initial public offering. 
C) initial portfolio offering. 
D) investment portfolio offering. 
A) investment portfolio option. 
B) initial public offering. 
C) initial portfolio offering. 
D) investment portfolio offering.

Question 16

________ assume the risk of issuing a new stock in the hope of earning profits on its sale.

Accepted Answer

A) Stock brokers 
B) Securities dealers 
C) Underwriters 
D) Stock speculators 
E) Reinsurers 
A) Stock brokers 
B) Securities dealers 
C) Underwriters 
D) Stock speculators 
E) Reinsurers

Question 17

Some automobile owners will drive faster knowing that they are covered by health and automobile insurance.This behavior creates the problem of

Accepted Answer

A) fraudulent claims. 
B) moral hazard. 
C) adverse selection. 
D) pecuniary purchases. 
A) fraudulent claims. 
B) moral hazard. 
C) adverse selection. 
D) pecuniary purchases.

Question 18

A ________ makes investment in established businesses which are publicly traded and takes them private.

Accepted Answer

A) sovereign wealth fund 
B) capital buyout fund 
C) hedge fund 
D) venture capital fund 
A) sovereign wealth fund 
B) capital buyout fund 
C) hedge fund 
D) venture capital fund

Question 19

Of the following financial intermediaries,which holds the least liquid assets?

Accepted Answer

A) property and casualty insurance companies 
B) life insurance companies 
C) money market mutual funds 
D) commercial banks 
A) property and casualty insurance companies 
B) life insurance companies 
C) money market mutual funds 
D) commercial banks

Question 20

In response to banks entering into the insurance business,insurance companies have started to supply ________ insurance.

Accepted Answer

A) debt 
B) credit 
C) equity 
D) currency 
A) debt 
B) credit 
C) equity 
D) currency

Exam 28: Web 3:nonbank Finance

The specialty of Lloyd's of London is

Allowing individuals to manage a portion of their Social Security funds is

Several features distinguish hedge funds from traditional mutual funds,including

A type of investment fund that makes long-term investments in companies that are not publicly traded is called a

When those most likely to produce the outcome insured against are the ones who purchase insurance,insurance companies are said to face the problem of

In recent years,bank regulatory authorities have

The key factor causing life insurance companies to move into the management of pension funds was

Fraudulent practices and other abuses of private pension funds led Congress to enact the

Which of the following is true of life insurance companies?

The government corporation that insures pension benefits is

Adverse selection occurs when those ________ likely to get ________ insurance payoffs are the ones who want to purchase insurance the most.

The higher the insurance coverage,the ________ the policyholder can gain from risky activities that make an insurance payoff ________ likely.

Loans made to consumers by finance companies are typically

In financial markets,when a firm issues stock for the first time it is called an

________ assume the risk of issuing a new stock in the hope of earning profits on its sale.

Some automobile owners will drive faster knowing that they are covered by health and automobile insurance.This behavior creates the problem of

A ________ makes investment in established businesses which are publicly traded and takes them private.

Of the following financial intermediaries,which holds the least liquid assets?

In response to banks entering into the insurance business,insurance companies have started to supply ________ insurance.

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Meaning of Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Web 1:financial Crises in Emerging Market Economies

Web 2:the Islm Model

Web 4:financial Derivatives

Web 5:conflicts of Interest in the Financial Services Industry

Filters

Adverse selection occurs when those likely to get insurance payoffs are the ones who want to purchase insurance the most.

The higher the insurance coverage,the the policyholder can gain from risky activities that make an insurance payoff likely.