Question 1

Diseconomies 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 2

Cost inefficiencies related to managerial performance and other hard-to-quantify factors are also called X-inefficiencies.

Accepted Answer

A) True 
 B)False

Question 3

The following information is available on the average costs of the three major banks in a given local market. Bank A has assets of $10 million and average costs are 15 per cent, Bank B has assets of $20 million and average costs of 13 per cent while Bank C has assets of $30 million with average costs of 12 per cent. Average costs are measured as a proportion of total assets. The above figures indicate that:

Accepted Answer

A)  there are significant economies of scale still present in the local markets. 
B)  there are significant diseconomies of scale still present in the local markets. 
C)  there are significant economies of scope still present in the local markets. 
D)  there are significant diseconomies of scope still present in the local markets. 
A)  there are significant economies of scale still present in the local markets. 
B)  there are significant diseconomies of scale still present in the local markets. 
C)  there are significant economies of scope still present in the local markets. 
D)  there are significant diseconomies of scope still present in the local markets.

Question 4

According to economic theory involving economies of scale, larger and more cost-efficient FIs should prevail over smaller, less cost-efficient FIs.

Accepted Answer

A) True 
 B)False

Question 5

Specific problems that can create employee risk include:

Accepted Answer

A)  War; external fraud. 
B)  Management information. 
C)  Money laundering; rogue trading and fraud risk 
D)  Taxation risk; confidentiality breach 
A)  War; external fraud. 
B)  Management information. 
C)  Money laundering; rogue trading and fraud risk 
D)  Taxation risk; confidentiality breach

Question 6

A major advantage of EFTPOS is that:

Accepted Answer

A)  the transaction value will be debited from the customer's account at a later point in time. 
B)  customers can use cheques to pay for their purchases. 
C)  customers do not have to carry cash to make purchases. 
D)  All of the listed options are correct. 
A)  the transaction value will be debited from the customer's account at a later point in time. 
B)  customers can use cheques to pay for their purchases. 
C)  customers do not have to carry cash to make purchases. 
D)  All of the listed options are correct.

Question 7

The total operating cost of producing services is $125 000 for a loan volume of $12 500 000. What is the average cost of loan production for the bank?

Accepted Answer

A)  0.1 per cent 
B)  1 per cent 
C)  10 per cent 
D)  100 per cent 
A)  0.1 per cent 
B)  1 per cent 
C)  10 per cent 
D)  100 per cent

Diseconomies of scope refers to the:

Cost inefficiencies related to managerial performance and other hard-to-quantify factors are also called X-inefficiencies.

According to economic theory involving economies of scale, larger and more cost-efficient FIs should prevail over smaller, less cost-efficient FIs.

Specific problems that can create employee risk include:

A major advantage of EFTPOS is that:

The total operating cost of producing services is $125 000 for a loan volume of $12 500 000. What is the average cost of loan production for the bank?

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 scope refers to the:

Cost inefficiencies related to managerial performance and other hard-to-quantify factors are also called X-inefficiencies.

According to economic theory involving economies of scale, larger and more cost-efficient FIs should prevail over smaller, less cost-efficient FIs.

Specific problems that can create employee risk include:

A major advantage of EFTPOS is that:

The total operating cost of producing services is $125 000 for a loan volume of $12 500 000. What is the average cost of loan production for the bank?

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