Question 1

Diseconomies of scale refers to the:

Accepted Answer

A)  fall in an FI's average costs of production as its output decreases. 
B)  fall in an FI's average costs of production as its output increases. 
C)  fall in an FI's average costs of production as its output remains stable. 
D)  increase in an FI's average costs of production as its output increases. 
A)  fall in an FI's average costs of production as its output decreases. 
B)  fall in an FI's average costs of production as its output increases. 
C)  fall in an FI's average costs of production as its output remains stable. 
D)  increase in an FI's average costs of production as its output increases. D

Question 2

According to studies, which of the following may better explain cost differences and operating cost efficiencies among FIs?

Accepted Answer

A)  diseconomies of scale 
B)  economies of scale 
C)  economies of scope 
D)  X-inefficiencies 
A)  diseconomies of scale 
B)  economies of scale 
C)  economies of scope 
D)  X-inefficiencies D

Question 3

Which of the following statements is false?

Accepted Answer

A)  Large-scale investments may result in excess capacity problems. 
B)  Large-scale investments may result in integration problems. 
C)  Large-scale investments may result in problems of capacity constraints. 
D)  Large-scale investments may result in cost overruns. 
A)  Large-scale investments may result in excess capacity problems. 
B)  Large-scale investments may result in integration problems. 
C)  Large-scale investments may result in problems of capacity constraints. 
D)  Large-scale investments may result in cost overruns. C

Question 4

Inputs such as capital and labour cannot be jointly used by FIs.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following occurs if the costs of joint production of FI services are higher than they would be if they were produced independently?

Accepted Answer

A)  economies of scale 
B)  diseconomies of scale 
C)  economies of scope 
D)  diseconomies of scope 
A)  economies of scale 
B)  diseconomies of scale 
C)  economies of scope 
D)  diseconomies of scope

Question 6

The effect of improving technology over time is to shift the AC curve upwards over time.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is true?

Accepted Answer

A)  The profitability of any product innovation is negatively related to the size of the stream of expected net cash flows from selling the services. 
B)  The profitability of any product innovation is positively related to the size of the stream of expected net cash flows from selling the services. 
C)  The profitability of any product innovation is unrelated to the size of the stream of expected net cash flows from selling the services. 
D)  The relationship depends on the FI's individual situation. 
A)  The profitability of any product innovation is negatively related to the size of the stream of expected net cash flows from selling the services. 
B)  The profitability of any product innovation is positively related to the size of the stream of expected net cash flows from selling the services. 
C)  The profitability of any product innovation is unrelated to the size of the stream of expected net cash flows from selling the services. 
D)  The relationship depends on the FI's individual situation.

Question 8

Retail customers mostly prefer to obtain their cash by withdrawing it from an ATM. Since 2005:

Accepted Answer

A)  there has been a general upward trend in the growth of ATM use. 
B)  growth in ATM use has been static. 
C)  there has been a general downward trend in the growth of ATM use. 
D)  None of the listed options are correct. 
A)  there has been a general upward trend in the growth of ATM use. 
B)  growth in ATM use has been static. 
C)  there has been a general downward trend in the growth of ATM use. 
D)  None of the listed options are correct.

Question 9

The success in technologically related innovation often is dependent on changes in regulations and regulatory procedures.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following are the two basic approaches to analysing the cost functions of FIs?

Accepted Answer

A)  Basic indicator approach and standardised approach. 
B)  Standardised approach and advanced measurement approach. 
C)  Production approach and intermediation approach. 
D)  Basic indicator approach and advanced measurement approach. 
A)  Basic indicator approach and standardised approach. 
B)  Standardised approach and advanced measurement approach. 
C)  Production approach and intermediation approach. 
D)  Basic indicator approach and advanced measurement approach.

Question 11

Which of the following statements is true?

Accepted Answer

A)  Various studies have shown that economies of scale best explain cost discrepancies between FIs. 
B)  Various studies have shown that economies of scope best explain cost discrepancies between FIs. 
C)  Various studies have shown that X-Inefficiencies best explain cost discrepancies between FIs. 
D)  Various studies have shown that Y-Inefficiencies best explain cost discrepancies between FIs. 
A)  Various studies have shown that economies of scale best explain cost discrepancies between FIs. 
B)  Various studies have shown that economies of scope best explain cost discrepancies between FIs. 
C)  Various studies have shown that X-Inefficiencies best explain cost discrepancies between FIs. 
D)  Various studies have shown that Y-Inefficiencies best explain cost discrepancies between FIs.

Question 12

How can interest income of an FI be increased by improved technological efficiency?

Accepted Answer

A)  By improving the efficiency of management of information flows. 
B)  By obtaining access to low cost sources of funds. 
C)  By linking services to the quality of the FI's technology. 
D)  By innovating new interest earning products. 
A)  By improving the efficiency of management of information flows. 
B)  By obtaining access to low cost sources of funds. 
C)  By linking services to the quality of the FI's technology. 
D)  By innovating new interest earning products.

Question 13

Economies of scope refers to the:

Accepted Answer

A)  fall in an FI's average costs of production as its output increases. 
B)  increase in an FI's average costs of production as its output increases. 
C)  situation in which the costs of joint production of FI services are higher than they would be if they were produced independently. 
D)  ability of an FI to generate synergistic cost savings through joint use of inputs in producing multiple outputs. 
A)  fall in an FI's average costs of production as its output increases. 
B)  increase in an FI's average costs of production as its output increases. 
C)  situation in which the costs of joint production of FI services are higher than they would be if they were produced independently. 
D)  ability of an FI to generate synergistic cost savings through joint use of inputs in producing multiple outputs.

Question 14

Some benefits of technological advancement for FIs include:

Accepted Answer

A)  convenience and service quality. 
B)  lower operating cost, cross-marketing and cross-selling potential. 
C)  less direct contact with customers. 
D)  All of the listed options are correct. 
A)  convenience and service quality. 
B)  lower operating cost, cross-marketing and cross-selling potential. 
C)  less direct contact with customers. 
D)  All of the listed options are correct.

Question 15

Which of the following statements is true?

Accepted Answer

A)  Exchange settlement accounts allow each FI to have settlement for transactions that occur by the adjustment of credit balances held with the central bank. 
B)  The central bank acts purely as a settlement agent. 
C)  The central bank is not exposed to any credit risk. 
D)  All of the listed options are correct. 
A)  Exchange settlement accounts allow each FI to have settlement for transactions that occur by the adjustment of credit balances held with the central bank. 
B)  The central bank acts purely as a settlement agent. 
C)  The central bank is not exposed to any credit risk. 
D)  All of the listed options are correct.

Question 16

There is little strong evidence that larger multi-product financial service firms enjoy cost advantages over smaller, more specialised firms.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not a source of operational risk for an FI?

Accepted Answer

A)  capital assets 
B)  customer relationships 
C)  technology 
D)  positive duration gap 
A)  capital assets 
B)  customer relationships 
C)  technology 
D)  positive duration gap

Question 18

How can interest expense of an FI be reduced by improved technological efficiency?

Accepted Answer

A)  By improving the efficiency of management of information flows. 
B)  By obtaining access to low cost sources of funds. 
C)  By linking services to the quality of the FI's technology. 
D)  By innovating new interest earning products. 
A)  By improving the efficiency of management of information flows. 
B)  By obtaining access to low cost sources of funds. 
C)  By linking services to the quality of the FI's technology. 
D)  By innovating new interest earning products.

Question 19

The most important banking area in which technology has impacted wholesale or corporate customer services is a financial institution's ability to provide:

Accepted Answer

A)  cash-management services. 
B)  residential mortgage lending. 
C)  issuance of certificates of deposit. 
D)  credit approval. 
A)  cash-management services. 
B)  residential mortgage lending. 
C)  issuance of certificates of deposit. 
D)  credit approval.

Question 20

Potential reasons that technologically based product innovations result in a negative net present value are:

Accepted Answer

A)  competitors' ability to mimic these products after long periods of time. 
B)  uncertainties over revenues and costs of these projects. 
C)  uncertainties over revenues and costs of these projects and competitors' ability to mimic these products after long periods of time. 
D)  certainty of cash flows and competitors' ability to mimic these products quickly. 
A)  competitors' ability to mimic these products after long periods of time. 
B)  uncertainties over revenues and costs of these projects. 
C)  uncertainties over revenues and costs of these projects and competitors' ability to mimic these products after long periods of time. 
D)  certainty of cash flows and competitors' ability to mimic these products quickly.

Diseconomies of scale refers to the:

According to studies, which of the following may better explain cost differences and operating cost efficiencies among FIs?

Which of the following statements is false?

Inputs such as capital and labour cannot be jointly used by FIs.

Which of the following occurs if the costs of joint production of FI services are higher than they would be if they were produced independently?

The effect of improving technology over time is to shift the AC curve upwards over time.

Which of the following statements is true?

Retail customers mostly prefer to obtain their cash by withdrawing it from an ATM. Since 2005:

The success in technologically related innovation often is dependent on changes in regulations and regulatory procedures.

Which of the following are the two basic approaches to analysing the cost functions of FIs?

Which of the following statements is true?

How can interest income of an FI be increased by improved technological efficiency?

Economies of scope refers to the:

Some benefits of technological advancement for FIs include:

Which of the following statements is true?

There is little strong evidence that larger multi-product financial service firms enjoy cost advantages over smaller, more specialised firms.

Which of the following is not a source of operational risk for an FI?

How can interest expense of an FI be reduced by improved technological efficiency?

The most important banking area in which technology has impacted wholesale or corporate customer services is a financial institution's ability to provide:

Potential reasons that technologically based product innovations result in a negative net present value are:

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

The Financial Services Industry: Other Financial Institutions

Risk of Financial Institutions

Interest Rate Risk Measurement: The Repricing Model

Interest Rate Risk Measurement: the Duration Model

Managing Interest Rate Risk Using Off Balance Sheet Instruments

Credit Risk I: Individual Loan Risk

Market Risk

Credit Risk I: Individual Loan Risk

Credit Risk II: Loan Portfolio and Concentration Risk

Sovereign Risk

Foreign Exchange Risk

Liquidity Risk

Liability and Liquidity Management

Off-Balance-Sheet Activities

Capital Management and Adequacy

Filters

Exam 17: Technology and Other Operational Risk

Diseconomies of scale refers to the:

According to studies, which of the following may better explain cost differences and operating cost efficiencies among FIs?

Which of the following statements is false?

Inputs such as capital and labour cannot be jointly used by FIs.

Which of the following occurs if the costs of joint production of FI services are higher than they would be if they were produced independently?

The effect of improving technology over time is to shift the AC curve upwards over time.

Which of the following statements is true?

Retail customers mostly prefer to obtain their cash by withdrawing it from an ATM. Since 2005:

The success in technologically related innovation often is dependent on changes in regulations and regulatory procedures.

Which of the following are the two basic approaches to analysing the cost functions of FIs?

Which of the following statements is true?

How can interest income of an FI be increased by improved technological efficiency?

Economies of scope refers to the:

Some benefits of technological advancement for FIs include:

Which of the following statements is true?

There is little strong evidence that larger multi-product financial service firms enjoy cost advantages over smaller, more specialised firms.

Which of the following is not a source of operational risk for an FI?

How can interest expense of an FI be reduced by improved technological efficiency?

The most important banking area in which technology has impacted wholesale or corporate customer services is a financial institution's ability to provide:

Potential reasons that technologically based product innovations result in a negative net present value are:

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

The Financial Services Industry: Other Financial Institutions

Risk of Financial Institutions

Interest Rate Risk Measurement: The Repricing Model

Interest Rate Risk Measurement: the Duration Model

Managing Interest Rate Risk Using Off Balance Sheet Instruments

Credit Risk I: Individual Loan Risk

Market Risk

Credit Risk I: Individual Loan Risk

Credit Risk II: Loan Portfolio and Concentration Risk

Sovereign Risk

Foreign Exchange Risk

Liquidity Risk

Liability and Liquidity Management

Off-Balance-Sheet Activities

Capital Management and Adequacy

Filters