Question 1

Of the three agencies that have been created to promote residential housing,the only one that is an entity of the U.S.government is

Accepted Answer

A) Fannie Mae. 
B) Ginnie Mae. 
C) Freddie Mac. 
D) Sallie Mae. 
A) Fannie Mae. 
B) Ginnie Mae. 
C) Freddie Mac. 
D) Sallie Mae.

Question 2

Vesting refers to

Accepted Answer

A) the length of time an insurance company has been in business. 
B) the length of time that a person must be enrolled in a pension plan before being entitled to receive benefits. 
C) the length of time until a CD matures. 
D) the premium required under term insurance. 
A) the length of time an insurance company has been in business. 
B) the length of time that a person must be enrolled in a pension plan before being entitled to receive benefits. 
C) the length of time until a CD matures. 
D) the premium required under term insurance.

Question 3

Which of the following is NOT a government-sponsored enterprise?

Accepted Answer

A) Fannie Mae. 
B) Freddie Mac. 
C) Federal Home Loan Banks. 
D) Ginnie Mae. 
A) Fannie Mae. 
B) Freddie Mac. 
C) Federal Home Loan Banks. 
D) Ginnie Mae.

Question 4

Brokers,in contrast to security dealers

Accepted Answer

A) hold inventories of securities. 
B) make their income through commissions. 
C) make their living on the spread between the bid price and the asked price. 
D) buy and sell securities at given prices. 
A) hold inventories of securities. 
B) make their income through commissions. 
C) make their living on the spread between the bid price and the asked price. 
D) buy and sell securities at given prices.

Question 5

Charging risk-based insurance premiums is a time-honored principle of insurance management to reduce

Accepted Answer

A) moral hazard. 
B) adverse selection. 
C) free riding. 
D) principal-agent problems. 
A) moral hazard. 
B) adverse selection. 
C) free riding. 
D) principal-agent problems.

Question 6

Property and casualty insurance companies are organized

Accepted Answer

A) both as stock and mutual companies. 
B) only as stock companies. 
C) only as mutual companies. 
D) primarily as cooperatives. 
A) both as stock and mutual companies. 
B) only as stock companies. 
C) only as mutual companies. 
D) primarily as cooperatives.

Question 7

Since Social Security benefits are paid from current contributions,the system is a

Accepted Answer

A) privatized system. 
B) overfunded system. 
C) "pay-as-you-go" system. 
D) defined contribution system. 
A) privatized system. 
B) overfunded system. 
C) "pay-as-you-go" system. 
D) defined contribution system.

Question 8

Explain the problems that necessitate insurance management,and three methods insurance companies use to address these problems.Identify the problem that each practice addresses.

Accepted Answer

Insurance companies face the problems of

Question 9

Keough plans and IRAs are

Accepted Answer

A) individual pension plans. 
B) government pension plans. 
C) corporate pension plans. 
D) public pension plans. 
A) individual pension plans. 
B) government pension plans. 
C) corporate pension plans. 
D) public pension plans.

Question 10

The practice of factoring involves

Accepted Answer

A) the syndication of underwriting large security issues. 
B) the selling of accounts receivable at a discount in return for cash. 
C) breaking up large mutual funds into smaller funds. 
D) spreading the risk of insurance through reinsurance. 
A) the syndication of underwriting large security issues. 
B) the selling of accounts receivable at a discount in return for cash. 
C) breaking up large mutual funds into smaller funds. 
D) spreading the risk of insurance through reinsurance.

Question 11

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.

Accepted Answer

A) moral hazard 
B) opportunism 
C) adverse selection 
D) shirking 
A) moral hazard 
B) opportunism 
C) adverse selection 
D) shirking

Question 12

A sales commission is charged for the purchase of

Accepted Answer

A) no-load mutual funds. 
B) load mutual funds. 
C) sinking mutual funds. 
D) syndicated funds. 
A) no-load mutual funds. 
B) load mutual funds. 
C) sinking mutual funds. 
D) syndicated funds.

Question 13

The type of credit insurance that landed AIG into trouble in 2008 is called

Accepted Answer

A) insurance rate swaps. 
B) monoline insurance. 
C) default insurance. 
D) credit default swaps. 
A) insurance rate swaps. 
B) monoline insurance. 
C) default insurance. 
D) credit default swaps.

Question 14

The regulatory agency responsible for regulating the activities of life insurance companies is

Accepted Answer

A) the FDIC. 
B) the Fed. 
C) the FHLBS. 
D) the appropriate state agency where the company is operating. 
A) the FDIC. 
B) the Fed. 
C) the FHLBS. 
D) the appropriate state agency where the company is operating.

Question 15

Which of the following is NOT an advantage of private equity funds?

Accepted Answer

A) Private companies are not subject to the same regulations as a publicly traded company. 
B) Managers of private firms are not under the same level of pressure to produce high returns compared to the managers of publicly traded firms. 
C) Private equity firms can do a better job in controlling the problems created by moral hazard. 
D) Private equity funds give managers of the companies higher stakes compared to managers in publicly traded companies. 
A) Private companies are not subject to the same regulations as a publicly traded company. 
B) Managers of private firms are not under the same level of pressure to produce high returns compared to the managers of publicly traded firms. 
C) Private equity firms can do a better job in controlling the problems created by moral hazard. 
D) Private equity funds give managers of the companies higher stakes compared to managers in publicly traded companies.

Question 16

Mutual funds in which a fixed number of nonredeemable shares are sold at an initial offering and are then traded in the over-the-counter market,like shares of common stock,are called

Accepted Answer

A) open-end funds. 
B) close-end funds. 
C) OTC funds. 
D) primary-issue funds. 
A) open-end funds. 
B) close-end funds. 
C) OTC funds. 
D) primary-issue funds.

Question 17

Privatization of Social Security involves

Accepted Answer

A) tax reductions. 
B) benefit reductions. 
C) increasing the retirement age. 
D) investing portions of the trust fund in corporate securities. 
A) tax reductions. 
B) benefit reductions. 
C) increasing the retirement age. 
D) investing portions of the trust fund in corporate securities.

Question 18

Social Security is a

Accepted Answer

A) fully funded pension plan. 
B) federally insured private pension plan. 
C) government sponsored private pension plan. 
D) "pay-as-you-go" system. 
A) fully funded pension plan. 
B) federally insured private pension plan. 
C) government sponsored private pension plan. 
D) "pay-as-you-go" system.

Question 19

The General Motors Acceptance Company (GMAC)is a

Accepted Answer

A) sales finance company. 
B) consumer finance company. 
C) business finance company. 
D) public finance company. 
A) sales finance company. 
B) consumer finance company. 
C) business finance company. 
D) public finance company.

Question 20

Elimination of minimum brokerage commission rates occurred because of

Accepted Answer

A) competition from banks. 
B) demands of institution investors. 
C) competition from foreign brokerage firms. 
D) an action of the Securities and Exchange Commission. 
A) competition from banks. 
B) demands of institution investors. 
C) competition from foreign brokerage firms. 
D) an action of the Securities and Exchange Commission.

Exam 28: Web 3:nonbank Finance

Of the three agencies that have been created to promote residential housing,the only one that is an entity of the U.S.government is

Vesting refers to

Which of the following is NOT a government-sponsored enterprise?

Brokers,in contrast to security dealers

Charging risk-based insurance premiums is a time-honored principle of insurance management to reduce

Property and casualty insurance companies are organized

Since Social Security benefits are paid from current contributions,the system is a

Explain the problems that necessitate insurance management,and three methods insurance companies use to address these problems.Identify the problem that each practice addresses.

Keough plans and IRAs are

The practice of factoring involves

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.

A sales commission is charged for the purchase of

The type of credit insurance that landed AIG into trouble in 2008 is called

The regulatory agency responsible for regulating the activities of life insurance companies is

Which of the following is NOT an advantage of private equity funds?

Mutual funds in which a fixed number of nonredeemable shares are sold at an initial offering and are then traded in the over-the-counter market,like shares of common stock,are called

Privatization of Social Security involves

Social Security is a

The General Motors Acceptance Company (GMAC)is a

Elimination of minimum brokerage commission rates occurred because of

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

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