Question 1

Modern forms of insurance can be traced back to around:

Accepted Answer

A) The early 1900s 
B) The early 1400s 
C) The mid 1800s 
D) The late 1700s 
A) The early 1900s 
B) The early 1400s 
C) The mid 1800s 
D) The late 1700s

Question 2

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 3

The reinsurance market is characterized as having:

Accepted Answer

A) A few buyers and many sellers 
B) Many buyers and sellers 
C) Few buyers and sellers 
D) Many buyers and a few sellers 
A) A few buyers and many sellers 
B) Many buyers and sellers 
C) Few buyers and sellers 
D) Many buyers and a few sellers

Question 4

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 5

In a defined-contribution plan:

Accepted Answer

A) Only the employee makes contributions into the fund 
B) The retirement benefits will vary with both the amount contributed and the performance of the fund 
C) The benefits are determined mainly by years of service 
D) No vesting is required; employees are eligible for benefits from the time they make their first contribution 
A) Only the employee makes contributions into the fund 
B) The retirement benefits will vary with both the amount contributed and the performance of the fund 
C) The benefits are determined mainly by years of service 
D) No vesting is required; employees are eligible for benefits from the time they make their first contribution

Question 6

As a result of technology, many small businesses today:

Accepted Answer

A) Are located closer to their bank 
B) Are located further from their bank 
C) Have more face-to-face interactions with their banker 
D) No longer need banks 
A) Are located closer to their bank 
B) Are located further from their bank 
C) Have more face-to-face interactions with their banker 
D) No longer need banks

Question 7

In many cases, life insurance companies will require applicants to take a physical.This is done to avoid the problem of:

Accepted Answer

A) Adverse selection 
B) Moral hazard 
C) Paying claims 
D) Transaction costs 
A) Adverse selection 
B) Moral hazard 
C) Paying claims 
D) Transaction costs

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

What is the source of regulatory competition in banking? Discuss how the focus of this competition has changed over time.

Accepted Answer

Regulatory competition in banking is the

Question 10

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 11

Pension funds resemble insurance companies by:

Accepted Answer

A) Pooling the savings of only large investors 
B) Accepting deposits 
C) Spreading risk 
D) Becoming better investments the longer you live 
A) Pooling the savings of only large investors 
B) Accepting deposits 
C) Spreading risk 
D) Becoming better investments the longer you live

Question 12

Unit banks are:

Accepted Answer

A) Banks with no branches 
B) More numerous in the United States than they were in previous decades 
C) No longer permitted to exist in the United States 
D) Commercial banks that have combined into one unit with an investment bank 
A) Banks with no branches 
B) More numerous in the United States than they were in previous decades 
C) No longer permitted to exist in the United States 
D) Commercial banks that have combined into one unit with an investment bank

Question 13

Explain the difference between a pension fund that is a defined-contribution plan from one that is a defined-benefit.

Accepted Answer

A defined benefit plan has the participa

Question 14

A saver has a choice between placing $50,000 of savings into a bank account at a bank insured by FDIC or investing the funds in a money market account where the funds are used to purchase only U.S.Treasury securities.Ignoring the interest return differences and only focusing on the principal, is one investment safer than the other? Explain.

Accepted Answer

The deposit at the bank is backed by the

Question 15

A business needs a loan to help keep its shelves stocked.This is an example of:

Accepted Answer

A) An inventory loan 
B) Sales finance 
C) Equipment leasing 
D) Consumer finance 
A) An inventory loan 
B) Sales finance 
C) Equipment leasing 
D) Consumer finance

Question 16

Congress chartered Sallie Mae to make loans to:

Accepted Answer

A) Homeowners 
B) Customers of securities brokers 
C) Small business owners 
D) Students 
A) Homeowners 
B) Customers of securities brokers 
C) Small business owners 
D) Students

Question 17

Explain why a large equipment provider that sells to many of its commercial customers on account may use a finance company.

Accepted Answer

A large equipment provider may use a fin

Question 18

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 19

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

Question 20

In the U.S.today:

Accepted Answer

A) Most banks are federally chartered 
B) Most banks are state chartered 
C) There are approximately equal numbers of state and federally chartered banks 
D) All new banks are federally chartered 
A) Most banks are federally chartered 
B) Most banks are state chartered 
C) There are approximately equal numbers of state and federally chartered banks 
D) All new banks are federally chartered

Exam 13: Financial Industry Structure

Modern forms of insurance can be traced back to around:

Whole life insurance has decreased in popularity due to:

The reinsurance market is characterized as having:

Vesting can make job changes costly because:

In a defined-contribution plan:

As a result of technology, many small businesses today:

In many cases, life insurance companies will require applicants to take a physical.This is done to avoid the problem of:

What is the source of regulatory competition in banking? Discuss how the focus of this competition has changed over time.

The growth of international banking has:

Pension funds resemble insurance companies by:

Unit banks are:

Explain the difference between a pension fund that is a defined-contribution plan from one that is a defined-benefit.

A business needs a loan to help keep its shelves stocked.This is an example of:

Congress chartered Sallie Mae to make loans to:

Explain why a large equipment provider that sells to many of its commercial customers on account may use a finance company.

The Federal Deposit Insurance Corporation (FDIC) was created:

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

In the U.S.today:

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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