Question 1

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 2

One of the results of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 was:

Accepted Answer

A) a reversal of the branching restrictions of the McFadden Act. 
B) an increase in the number of banks in the U.S. 
C) a decrease in the average size of banks. 
D) a decrease in commercial banks but an increase in the number of savings and loans and savings banks. 
A) a reversal of the branching restrictions of the McFadden Act. 
B) an increase in the number of banks in the U.S. 
C) a decrease in the average size of banks. 
D) a decrease in commercial banks but an increase in the number of savings and loans and savings banks.

Question 3

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 4

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 5

Why do insurance companies often find it necessary to purchase re-insurance?

Accepted Answer

Reinsurance is purchased when insurance

Question 6

In order for insurance companies to generate predictable payouts, they need to:

Accepted Answer

A) spread the risk across many policies. 
B) accept policyholders from a very specific geographic area. 
C) focus on insuring only specific events, for example only fire. 
D) offer only life insurance. 
A) spread the risk across many policies. 
B) accept policyholders from a very specific geographic area. 
C) focus on insuring only specific events, for example only fire. 
D) offer only life insurance.

Question 7

The Bank Holding Company Act of 1956:

Accepted Answer

A) significantly broadened the scope of what bank holding companies could do. 
B) limited bank holding companies to operating only within their chartered state. 
C) limited the scope of bank holding companies in terms of services offered. 
D) repealed the McFadden Act of 1927. 
A) significantly broadened the scope of what bank holding companies could do. 
B) limited bank holding companies to operating only within their chartered state. 
C) limited the scope of bank holding companies in terms of services offered. 
D) repealed the McFadden Act of 1927.

Question 8

The Volcker rule in the Dodd-Frank Act does which of the following?

Accepted Answer

A) Creates a host of new agencies to streamline the regulatory process 
B) Increases oversight of specific institutions regarded as a systemic risk 
C) Introduces significant regulation of hedge funds 
D) Forbids insured depositories from proprietary trading 
A) Creates a host of new agencies to streamline the regulatory process 
B) Increases oversight of specific institutions regarded as a systemic risk 
C) Introduces significant regulation of hedge funds 
D) Forbids insured depositories from proprietary trading

Question 9

Bank holding companies developed:

Accepted Answer

A) to get around the limitations on bank branching. 
B) so foreign banks could open branches in the U.S. 
C) to circumvent the regulation by the Office of the Comptroller of the Currency. 
D) so that unit banks could combine into larger banks. 
A) to get around the limitations on bank branching. 
B) so foreign banks could open branches in the U.S. 
C) to circumvent the regulation by the Office of the Comptroller of the Currency. 
D) so that unit banks could combine into larger banks.

Question 10

Property and casualty insurers will hold assets of shorter maturities than life insurance companies because:

Accepted Answer

A) shorter maturity assets usually have higher returns. 
B) life insurance companies may find they need to get liquid unexpectedly. 
C) property and casualty insurers can find themselves needing to get liquid unexpectedly. 
D) life insurance companies generally take on more risk than property and casualty companies. 
A) shorter maturity assets usually have higher returns. 
B) life insurance companies may find they need to get liquid unexpectedly. 
C) property and casualty insurers can find themselves needing to get liquid unexpectedly. 
D) life insurance companies generally take on more risk than property and casualty companies.

Question 11

Considering the government-sponsored enterprises like Freddie Mac, Fannie Mae, and others, do you see any indication that the managers of these agencies are creating a moral hazard? Explain.

Accepted Answer

As the text points out, the Federal Rese

Question 12

Hedge funds can be described as:

Accepted Answer

A) low risk. 
B) moderate risk. 
C) very high risk. 
D) only as risky as the entire stock market as measured by an index such as the S&P 500. 
A) low risk. 
B) moderate risk. 
C) very high risk. 
D) only as risky as the entire stock market as measured by an index such as the S&P 500.

Question 13

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 14

The Federal Deposit Insurance Corporation (FDIC) was created:

Accepted Answer

A) in 1933 as a part of the Glass-Steagall Act. 
B) when the Federal Reserve was created in 1914. 
C) prior to the stock market crash of 1929. 
D) in 1927 as a part of the McFadden Act. 
A) in 1933 as a part of the Glass-Steagall Act. 
B) when the Federal Reserve was created in 1914. 
C) prior to the stock market crash of 1929. 
D) in 1927 as a part of the McFadden Act.

Question 15

The Dodd-Frank does all of the following except:

Accepted Answer

A) sets out new rules for financial institutions and markets. 
B) repeals the Glass-Steagall Act of 1933. 
C) requires closer government oversight over key establishments called systemically important financial institutions. 
D) sharply alters the authorities of the government agencies that govern the financial sector. 
A) sets out new rules for financial institutions and markets. 
B) repeals the Glass-Steagall Act of 1933. 
C) requires closer government oversight over key establishments called systemically important financial institutions. 
D) sharply alters the authorities of the government agencies that govern the financial sector.

Question 16

If someone wants to start a bank today they would have to:

Accepted Answer

A) obtain a charter from the federal government. 
B) simply have $5 million is startup capital, a charter is no longer needed. 
C) obtain a charter either from the federal or state government. 
D) obtain a state charter, the federal government stopped issuing charters in 1970. 
A) obtain a charter from the federal government. 
B) simply have $5 million is startup capital, a charter is no longer needed. 
C) obtain a charter either from the federal or state government. 
D) obtain a state charter, the federal government stopped issuing charters in 1970.

Question 17

Explain why a domestic bank in the U.S.might create a subsidiary bank in a foreign location like the Cayman Islands.

Accepted Answer

A U.S.domestic bank may find it profitab

Question 18

One of the results of the limit on bank branching was:

Accepted Answer

A) increased diversification in the loan portfolio of small banks. 
B) curtailment of credit availability for borrowers in small towns. 
C) lower profits for banks. 
D) increased efficiency in the operations of banks. 
A) increased diversification in the loan portfolio of small banks. 
B) curtailment of credit availability for borrowers in small towns. 
C) lower profits for banks. 
D) increased efficiency in the operations of banks.

Question 19

Which of the following is not a reason to create large financial holding companies?

Accepted Answer

A) Financial holding companies offer a wide array of services under one brand 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) Financial holding companies are exempt from having to pay for FDIC insurance on deposits. 
A) Financial holding companies offer a wide array of services under one brand 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) Financial holding companies are exempt from having to pay for FDIC insurance on deposits.

Question 20

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.

Exam 13: Financial Industry Structure

Vesting can make job changes costly because:

One of the results of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 was:

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

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

Why do insurance companies often find it necessary to purchase re-insurance?

In order for insurance companies to generate predictable payouts, they need to:

The Bank Holding Company Act of 1956:

The Volcker rule in the Dodd-Frank Act does which of the following?

Bank holding companies developed:

Property and casualty insurers will hold assets of shorter maturities than life insurance companies because:

Considering the government-sponsored enterprises like Freddie Mac, Fannie Mae, and others, do you see any indication that the managers of these agencies are creating a moral hazard? Explain.

Hedge funds can be described as:

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 Federal Deposit Insurance Corporation (FDIC) was created:

The Dodd-Frank does all of the following except:

If someone wants to start a bank today they would have to:

Explain why a domestic bank in the U.S.might create a subsidiary bank in a foreign location like the Cayman Islands.

One of the results of the limit on bank branching was:

Which of the following is not a reason to create large financial holding companies?

Insurance companies can predict fairly accurately:

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

Filters