Question 1

Banks exert some control over who will regulate them because banks:

Accepted Answer

A) spend a lot of money contributing to political campaigns. 
B) can switch their charter from state to federal and vice versa. 
C) have the right to decide on which regulator will oversee their bank. 
D) pay the salary of the regulator. 
A) spend a lot of money contributing to political campaigns. 
B) can switch their charter from state to federal and vice versa. 
C) have the right to decide on which regulator will oversee their bank. 
D) pay the salary of the regulator. B

Question 2

Whole life insurance differs from term life in which of the following ways?

Accepted Answer

A) Whole life has a rising premium as the policyholder ages, but term life has a fixed premium. 
B) Term life has a savings component while whole life is pure insurance. 
C) Term life is usually more expensive than whole life. 
D) Whole life is a combination of term life insurance and a savings account. 
A) Whole life has a rising premium as the policyholder ages, but term life has a fixed premium. 
B) Term life has a savings component while whole life is pure insurance. 
C) Term life is usually more expensive than whole life. 
D) Whole life is a combination of term life insurance and a savings account. D

Question 3

Modern forms of insurance can be traced back to around:

Accepted Answer

A) the early 1900s. 
B) the early 1400s. 
C) the mid 1800s. 
D) the late 1700s. 
A) the early 1900s. 
B) the early 1400s. 
C) the mid 1800s. 
D) the late 1700s. B

Question 4

Pension funds resemble insurance companies by:

Accepted Answer

A) pooling the savings of only large investors. 
B) accepting deposits. 
C) spreading risk. 
D) becoming better investments the longer you live. 
A) pooling the savings of only large investors. 
B) accepting deposits. 
C) spreading risk. 
D) becoming better investments the longer you live.

Question 5

In recent years the U.S.banking structure has changed in such a way that there are now:

Accepted Answer

A) more banks. 
B) fewer branches. 
C) fewer banks but more branches. 
D) fewer banks and fewer banks with branches. 
A) more banks. 
B) fewer branches. 
C) fewer banks but more branches. 
D) fewer banks and fewer banks with branches.

Question 6

A unit bank is a bank that:

Accepted Answer

A) only makes one type of loan, (i.e.; home mortgages). 
B) only offers savings accounts. 
C) provides a myriad of financial services, so customers get all or most of their financial needs taken care of at the bank. 
D) has no branches. 
A) only makes one type of loan, (i.e.; home mortgages). 
B) only offers savings accounts. 
C) provides a myriad of financial services, so customers get all or most of their financial needs taken care of at the bank. 
D) has no branches.

Question 7

Pension funds resemble life insurance companies in the sense that:

Accepted Answer

A) the payoff occurs only occurs when a person dies. 
B) they accept deposits. 
C) they offer the ability to make premium payments today in return for a promised payment under specified future circumstances. 
D) they both are better investments the longer you live. 
A) the payoff occurs only occurs when a person dies. 
B) they accept deposits. 
C) they offer the ability to make premium payments today in return for a promised payment under specified future circumstances. 
D) they both are better investments the longer you live.

Question 8

Which of the following is not a nondepository institution?

Accepted Answer

A) A savings and loan 
B) An insurance company 
C) A mutual fund company 
D) A pension fund 
A) A savings and loan 
B) An insurance company 
C) A mutual fund company 
D) A pension fund

Question 9

The Gramm-Leach-Bliley Act:

Accepted Answer

A) repealed the Riegle-Neal Interstate Banking and Branching Efficiency Act. 
B) repealed the Glass-Steagall Act's prohibition of mergers between commercial banks and insurance or securities firms. 
C) repealed the McFadden Act's restriction on bank branching. 
D) reinforced the Glass-Steagall Act's limitation on commercial banks' availability to merge with insurance or securities firms by increasing the penalties for doing so. 
A) repealed the Riegle-Neal Interstate Banking and Branching Efficiency Act. 
B) repealed the Glass-Steagall Act's prohibition of mergers between commercial banks and insurance or securities firms. 
C) repealed the McFadden Act's restriction on bank branching. 
D) reinforced the Glass-Steagall Act's limitation on commercial banks' availability to merge with insurance or securities firms by increasing the penalties for doing so.

Question 10

In most companies, an employee must work for a number of years before qualifying for pension benefits.This process is referred to as:

Accepted Answer

A) a defined-benefit period. 
B) vesting. 
C) regulated contribution period. 
D) mandatory benefit pending. 
A) a defined-benefit period. 
B) vesting. 
C) regulated contribution period. 
D) mandatory benefit pending.

Question 11

The practice of "placing the issue" is conducted by:

Accepted Answer

A) the underwriting services of investment banks. 
B) mutual fund companies. 
C) brokerage firms. 
D) commercial banks. 
A) the underwriting services of investment banks. 
B) mutual fund companies. 
C) brokerage firms. 
D) commercial banks.

Question 12

Explain why anti-branching laws often created credit crunches that slowed economic growth.

Accepted Answer

When a small community bank is protected

Question 13

An Edge Act Corporation is:

Accepted Answer

A) a company created so a U.S.bank can operate in more than one state. 
B) a subsidiary of a bank created to provide insurance and securities services. 
C) a company created by a non-bank corporation used to purchase and operate banks. 
D) a subsidiary of a domestic bank that is established specifically to engage in international banking transactions. 
A) a company created so a U.S.bank can operate in more than one state. 
B) a subsidiary of a bank created to provide insurance and securities services. 
C) a company created by a non-bank corporation used to purchase and operate banks. 
D) a subsidiary of a domestic bank that is established specifically to engage in international banking transactions.

Question 14

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 15

Which of the following statements best completes the following statement: "Over the past 40 years, the percentage(s) of assets for all financial intermediaries…"?

Accepted Answer

A) controlled by banks has decreased as has the percentage for mutual funds while insurance companies have increased their percentage. 
B) controlled by insurance companies and mutual funds has decreased and the percentage controlled by banks has increased. 
C) controlled by banks and insurance companies has decreased while the percentage controlled by mutual funds and pensions has increased. 
D) controlled by banks, insurance companies, mutual funds and pensions have all increased. 
A) controlled by banks has decreased as has the percentage for mutual funds while insurance companies have increased their percentage. 
B) controlled by insurance companies and mutual funds has decreased and the percentage controlled by banks has increased. 
C) controlled by banks and insurance companies has decreased while the percentage controlled by mutual funds and pensions has increased. 
D) controlled by banks, insurance companies, mutual funds and pensions have all increased.

Question 16

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 17

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 18

From a transaction cost perspective, discuss why a firm may contract with an investment bank to underwrite or place an issue.

Accepted Answer

Investment banks generate their fees fro

Question 19

A young father needing to provide his family with financial security would be better off purchasing:

Accepted Answer

A) a whole life insurance policy. 
B) a term life insurance policy. 
C) as much life insurance as they can afford. 
D) no life insurance; instead he should focus on saving. 
A) a whole life insurance policy. 
B) a term life insurance policy. 
C) as much life insurance as they can afford. 
D) no life insurance; instead he should focus on saving.

Question 20

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.

Exam 13: Financial Industry Structure

Banks exert some control over who will regulate them because banks:

Whole life insurance differs from term life in which of the following ways?

Modern forms of insurance can be traced back to around:

Pension funds resemble insurance companies by:

In recent years the U.S.banking structure has changed in such a way that there are now:

A unit bank is a bank that:

Pension funds resemble life insurance companies in the sense that:

Which of the following is not a nondepository institution?

The Gramm-Leach-Bliley Act:

In most companies, an employee must work for a number of years before qualifying for pension benefits.This process is referred to as:

The practice of "placing the issue" is conducted by:

Explain why anti-branching laws often created credit crunches that slowed economic growth.

An Edge Act Corporation is:

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

Which of the following statements best completes the following statement: "Over the past 40 years, the percentage(s) of assets for all financial intermediaries…"?

In a defined-contribution plan:

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

From a transaction cost perspective, discuss why a firm may contract with an investment bank to underwrite or place an issue.

A young father needing to provide his family with financial security would be better off purchasing:

Unit banks are:

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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