Question 1

In what way(s) can a pension plan be seen as the opposite of life insurance?

Accepted Answer

A pension plan pays off if you live; lif

Question 2

In 2008, as a result of a run on government-sponsored enterprise debt, the U.S.Treasury placed Fannie Mae and Freddie Mac in:

Accepted Answer

A) conservatorship. 
B) receivership. 
C) bankruptcy. 
D) trusteeship. 
A) conservatorship. 
B) receivership. 
C) bankruptcy. 
D) trusteeship.

Question 3

A typical automobile insurance policy is an example of:

Accepted Answer

A) liability insurance only. 
B) property and casualty insurance. 
C) property insurance only. 
D) casualty insurance only. 
A) liability insurance only. 
B) property and casualty insurance. 
C) property insurance only. 
D) casualty insurance only.

Question 4

Whole life insurance has decreased in popularity due to:

Accepted Answer

A) many whole life insurance companies becoming bankrupt. 
B) cheaper savings alternatives that have developed, making whole life policies expensive savings vehicles. 
C) mergers with property and casualty companies, raising the cost of all insurance. 
D) lower interest rates on alternative savings vehicles. 
A) many whole life insurance companies becoming bankrupt. 
B) cheaper savings alternatives that have developed, making whole life policies expensive savings vehicles. 
C) mergers with property and casualty companies, raising the cost of all insurance. 
D) lower interest rates on alternative savings vehicles.

Question 5

Eurodollars are:

Accepted Answer

A) the currency of the European Economic Union. 
B) euro-denominated deposits in U.S.Banks. 
C) dollar-denominated deposits in banks outside the United States. 
D) dollars that are specially printed for use abroad to minimize counterfeiting. 
A) the currency of the European Economic Union. 
B) euro-denominated deposits in U.S.Banks. 
C) dollar-denominated deposits in banks outside the United States. 
D) dollars that are specially printed for use abroad to minimize counterfeiting.

Question 6

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 7

Which of the following is an example that can help explain increased profits for large financial holding companies?

Accepted Answer

A) Financial holding companies offer a wide array of services under many brand names. 
B) Financial holding companies need only one CEO, one Board of Directors, and one computer system regardless of size. 
C) Financial holding companies are not well diversified and receive a higher return for the higher risk. 
D) Financial holding companies are exempt from having to pay for FDIC insurance. 
A) Financial holding companies offer a wide array of services under many brand names. 
B) Financial holding companies need only one CEO, one Board of Directors, and one computer system regardless of size. 
C) Financial holding companies are not well diversified and receive a higher return for the higher risk. 
D) Financial holding companies are exempt from having to pay for FDIC insurance.

Question 8

A homeowner discovers that a large tree in his yard is diseased and may fall in a bad windstorm and if it falls, it will likely destroy the garage.The cost to have the tree cut down is significant but the homeowner has an insurance policy and figures that if the tree falls and destroys the garage, the insurance company will pay, and the deductible is less than the cost to have the tree removed.This is an example of:

Accepted Answer

A) information symmetry. 
B) adverse selection. 
C) moral hazard. 
D) screening. 
A) information symmetry. 
B) adverse selection. 
C) moral hazard. 
D) screening.

Question 9

The Social Security System in the U.S.is best described as a:

Accepted Answer

A) defined benefits plan. 
B) defined contribution plan. 
C) employer funded plan. 
D) pay-as-you-go system. 
A) defined benefits plan. 
B) defined contribution plan. 
C) employer funded plan. 
D) pay-as-you-go system.

Question 10

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 11

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.

Question 12

The number of banks in the U.S.today is approximately:

Accepted Answer

A) 6,100. 
B) 500. 
C) 100. 
D) 15,300. 
A) 6,100. 
B) 500. 
C) 100. 
D) 15,300.

Question 13

The U.S.has many banks because:

Accepted Answer

A) small banks are more profitable than large banks. 
B) many states outlawed bank branching. 
C) the Great Depression caused the failure of the large banks, leaving many small banks. 
D) the Glass-Steagall Act forced the splitting up of large banks. 
A) small banks are more profitable than large banks. 
B) many states outlawed bank branching. 
C) the Great Depression caused the failure of the large banks, leaving many small banks. 
D) the Glass-Steagall Act forced the splitting up of large banks.

Question 14

An insurance company provides liability insurance to a restaurant protecting the owner against claims from customers.One area of coverage is protections against food poisoning claims.The insurance company may periodically send an employee into the restaurant to observe food preparation and food storage processes.The insurance company is trying to avoid:

Accepted Answer

A) free riding. 
B) moral hazard. 
C) adverse selection. 
D) transaction costs. 
A) free riding. 
B) moral hazard. 
C) adverse selection. 
D) transaction costs.

Question 15

The dual banking system in the U.S.today refers to:

Accepted Answer

A) a bank's ability to issue checking and saving accounts. 
B) a bank's ability to own another financial institution. 
C) the ability of banks to be either federally or state chartered. 
D) a deposit institution's decision to be either a bank or a savings and loan. 
A) a bank's ability to issue checking and saving accounts. 
B) a bank's ability to own another financial institution. 
C) the ability of banks to be either federally or state chartered. 
D) a deposit institution's decision to be either a bank or a savings and loan.

Question 16

Government-sponsored enterprises like Fannie Mae and Freddie Mac usually borrow at interest rates:

Accepted Answer

A) below what private lenders pay. 
B) exceeding what private lenders pay. 
C) that are the same as private lenders since they are really a private lender. 
D) that are slightly below the federal funds rate. 
A) below what private lenders pay. 
B) exceeding what private lenders pay. 
C) that are the same as private lenders since they are really a private lender. 
D) that are slightly below the federal funds rate.

Question 17

Many health insurers require a deductible where the policyholder pays the first part of any loss.The use of a deductible most directly treats the problem of:

Accepted Answer

A) free riding. 
B) adverse selection. 
C) people going uninsured. 
D) moral hazard. 
A) free riding. 
B) adverse selection. 
C) people going uninsured. 
D) moral hazard.

Question 18

Over the last twenty years in the U.S., the number of banks has:

Accepted Answer

A) steadily increased. 
B) stayed about the same. 
C) steadily decreased. 
D) more than doubled. 
A) steadily increased. 
B) stayed about the same. 
C) steadily decreased. 
D) more than doubled.

Question 19

Accounts receivable loans provided by finance companies provide firms with:

Accepted Answer

A) start-up capital. 
B) the ability to turn a liability into an asset. 
C) the ability to turn a relatively illiquid asset into liquidity. 
D) inventory loans. 
A) start-up capital. 
B) the ability to turn a liability into an asset. 
C) the ability to turn a relatively illiquid asset into liquidity. 
D) inventory loans.

Question 20

Fannie Mae, Freddie Mac, and similar government-sponsored enterprises obtain their funds from:

Accepted Answer

A) the U.S.Treasury. 
B) the Federal Reserve. 
C) issuing commercial paper and bonds. 
D) both the U.S.Treasury and the Federal Reserve. 
A) the U.S.Treasury. 
B) the Federal Reserve. 
C) issuing commercial paper and bonds. 
D) both the U.S.Treasury and the Federal Reserve.

Exam 13: Financial Industry Structure

In what way(s) can a pension plan be seen as the opposite of life insurance?

In 2008, as a result of a run on government-sponsored enterprise debt, the U.S.Treasury placed Fannie Mae and Freddie Mac in:

A typical automobile insurance policy is an example of:

Whole life insurance has decreased in popularity due to:

Eurodollars are:

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?

Which of the following is an example that can help explain increased profits for large financial holding companies?

The Social Security System in the U.S.is best described as a:

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

The growth of international banking has:

The number of banks in the U.S.today is approximately:

The U.S.has many banks because:

The dual banking system in the U.S.today refers to:

Government-sponsored enterprises like Fannie Mae and Freddie Mac usually borrow at interest rates:

Many health insurers require a deductible where the policyholder pays the first part of any loss.The use of a deductible most directly treats the problem of:

Over the last twenty years in the U.S., the number of banks has:

Accounts receivable loans provided by finance companies provide firms with:

Fannie Mae, Freddie Mac, and similar government-sponsored enterprises obtain their funds from:

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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