Question 1

Finance companies perform all of the following functions, except:

Accepted Answer

A) Issue commercial paper and securities 
B) Take deposits 
C) Make loans 
D) Lease equipment to firms 
A) Issue commercial paper and securities 
B) Take deposits 
C) Make loans 
D) Lease equipment to firms

Question 2

The number of banks in the U.S.has fallen almost by half in the past twenty years or so.Was this the result of bank failures or were some due to another cause? Explain.

Accepted Answer

While some banks have certainly failed o

Question 3

What does it mean to say the United States has a dual banking system?

Accepted Answer

This means that banks can decide to be s

Question 4

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D) Repealed the McFadden Act of 1927 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D) Repealed the McFadden Act of 1927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 5

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 as 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 as 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 6

Many states prohibited bank branching because of all of the following except:

Accepted Answer

A) They feared the concentration and monopoly power of large banks 
B) They generated significant revenue from issuing bank charters 
C) They wanted to protect the profits of banks since they generated tax revenue from these profits 
D) The McFadden Act of 1927 
A) They feared the concentration and monopoly power of large banks 
B) They generated significant revenue from issuing bank charters 
C) They wanted to protect the profits of banks since they generated tax revenue from these profits 
D) The McFadden Act of 1927

Question 7

Which of the following statements is false?

Accepted Answer

A) Pension plans and life insurance are often both offered by the same institution 
B) Life insurance companies hold more in stocks than pension funds do 
C) Life insurance pays off when you die while the pension plan pays off if you don't 
D) They are both vehicles for saving 
A) Pension plans and life insurance are often both offered by the same institution 
B) Life insurance companies hold more in stocks than pension funds do 
C) Life insurance pays off when you die while the pension plan pays off if you don't 
D) They are both vehicles for saving

Question 8

The growth of Internet banking seems to be on the rise.Discuss what the continued growth of Internet banking should do to both the economies of scale and scope of banking.

Accepted Answer

Internet banking allows a bank to avoid

Question 9

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 10

Insurance company assets will include:

Accepted Answer

A) Stocks and bonds 
B) Only bonds 
C) Only stocks 
D) Only U.S.Treasury securities 
A) Stocks and bonds 
B) Only bonds 
C) Only stocks 
D) Only U.S.Treasury securities

Question 11

Because most insurance companies insure many people, they do not have to worry about the problem of:

Accepted Answer

A) Moral hazard 
B) Adverse selection 
C) Spreading of risk 
D) Information asymmetry 
A) Moral hazard 
B) Adverse selection 
C) Spreading of risk 
D) Information asymmetry

Question 12

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 13

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 14

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 15

What is the basic difference(s) between term and whole life insurance?

Accepted Answer

Term life insurance is just life insuran

Question 16

The use of coinsurance clauses and deductibles is an attempt by insurance companies to deal with the problem of:

Accepted Answer

A) Non-payment of premiums 
B) Adverse selection 
C) Insufficient government regulation 
D) Moral hazard 
A) Non-payment of premiums 
B) Adverse selection 
C) Insufficient government regulation 
D) Moral hazard

Question 17

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 18

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 19

Which of the following is an accurate statement about universal banks?

Accepted Answer

A) In Germany universal banks do everything under one roof, including direct investment in the shares of nonfinancial firms 
B) In Germany the provision of insurance, banking, and securities must be done by separate corporations 
C) As in Germany, universal banks in the United States do everything under one roof, including direct investment in the shares of nonfinancial firms 
D) Universal banks in the United States account for the largest share of financial intermediary assets 
A) In Germany universal banks do everything under one roof, including direct investment in the shares of nonfinancial firms 
B) In Germany the provision of insurance, banking, and securities must be done by separate corporations 
C) As in Germany, universal banks in the United States do everything under one roof, including direct investment in the shares of nonfinancial firms 
D) Universal banks in the United States account for the largest share of financial intermediary assets

Question 20

Why does the United States have more banks that most other highly industrialized countries?

Accepted Answer

The United States, for many years, had l

Exam 13: Financial Industry Structure

Finance companies perform all of the following functions, except:

The number of banks in the U.S.has fallen almost by half in the past twenty years or so.Was this the result of bank failures or were some due to another cause? Explain.

What does it mean to say the United States has a dual banking system?

The Bank Holding Company Act of 1956:

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

Many states prohibited bank branching because of all of the following except:

Which of the following statements is false?

The growth of Internet banking seems to be on the rise.Discuss what the continued growth of Internet banking should do to both the economies of scale and scope of banking.

Pension funds resemble life insurance companies in the sense that:

Insurance company assets will include:

Because most insurance companies insure many people, they do not have to worry about the problem of:

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

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.

A typical automobile insurance policy is an example of:

What is the basic difference(s) between term and whole life insurance?

The use of coinsurance clauses and deductibles is an attempt by insurance companies to deal with the problem of:

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

Which of the following is not a nondepository institution?

Which of the following is an accurate statement about universal banks?

Why does the United States have more banks that most other highly industrialized countries?

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