Question 1

The asset transformation function of FIs typically involves:

Accepted Answer

A) receipt of securities through electronic payments systems 
B) altering the liquidity and maturity features of funds sources used to finance the FI's asset portfolio 
C) granting loans to transform funds deficit units into funds surplus units 
D) investing short-term funds in off-balance-sheet activities 
A) receipt of securities through electronic payments systems 
B) altering the liquidity and maturity features of funds sources used to finance the FI's asset portfolio 
C) granting loans to transform funds deficit units into funds surplus units 
D) investing short-term funds in off-balance-sheet activities

Question 2

Which of the following statements is true in the context of diversification?

Accepted Answer

A) As long as the return on different investments is not perfectly positively correlated, financial intermediaries can diversify away significant amounts of portfolio risk. 
B) As long as the return on different investments is not perfectly negatively correlated, financial intermediaries can diversify away significant amounts of portfolio risk. 
C) As long as the return on different investments is perfectly positively correlated, financial intermediaries can diversify away significant amounts of portfolio risk. 
D) None of the listed options are correct. 
A) As long as the return on different investments is not perfectly positively correlated, financial intermediaries can diversify away significant amounts of portfolio risk. 
B) As long as the return on different investments is not perfectly negatively correlated, financial intermediaries can diversify away significant amounts of portfolio risk. 
C) As long as the return on different investments is perfectly positively correlated, financial intermediaries can diversify away significant amounts of portfolio risk. 
D) None of the listed options are correct.

Question 3

Which of the following statements is true?

Accepted Answer

A) Bank loans that represent more than 5 per cent of a banking group's capital must be reported quarterly to APRA. 
B) Bank loans that represent more than 10 per cent of a banking group's capital must be reported quarterly to APRA. 
C) Bank loans that represent more than 5 per cent of a banking group's liabilities must be reported quarterly to APRA. 
D) Bank loans that represent more than 10 per cent of a banking group's liabilities must be reported quarterly to APRA. 
A) Bank loans that represent more than 5 per cent of a banking group's capital must be reported quarterly to APRA. 
B) Bank loans that represent more than 10 per cent of a banking group's capital must be reported quarterly to APRA. 
C) Bank loans that represent more than 5 per cent of a banking group's liabilities must be reported quarterly to APRA. 
D) Bank loans that represent more than 10 per cent of a banking group's liabilities must be reported quarterly to APRA.

Question 4

Why do households prefer to use FIs as intermediaries to invest their surplus funds?

Accepted Answer

A) Transaction costs are low to the household since FIs are more efficient in monitoring and gathering investment information. 
B) To receive the benefits of diversification that households may not be able to achieve on their own. 
C) The FI can benefit from combining funds and negotiating lower asset prices and transaction costs 
D) All of the listed options are correct. 
A) Transaction costs are low to the household since FIs are more efficient in monitoring and gathering investment information. 
B) To receive the benefits of diversification that households may not be able to achieve on their own. 
C) The FI can benefit from combining funds and negotiating lower asset prices and transaction costs 
D) All of the listed options are correct.

Question 5

Economies of scale is the concept that:

Accepted Answer

A) a cost reduction in trading and other transaction services results from increased efficiency when FIs perform these services. 
B) a profitability decrease in trading and other transaction services results from increased efficiency when FIs perform these services. 
C) a cost reduction in trading and other transaction services results from stable efficiency when FIs perform these services. 
D) None of the listed options are correct. 
A) a cost reduction in trading and other transaction services results from increased efficiency when FIs perform these services. 
B) a profitability decrease in trading and other transaction services results from increased efficiency when FIs perform these services. 
C) a cost reduction in trading and other transaction services results from stable efficiency when FIs perform these services. 
D) None of the listed options are correct.

Question 6

Many households place funds with financial institutions because many FI accounts provide:

Accepted Answer

A) lower denominations than other securities 
B) flexible maturities versus other interest-earning securities 
C) better liquidity than directly negotiated debt contracts 
D) All of the listed options are correct. 
A) lower denominations than other securities 
B) flexible maturities versus other interest-earning securities 
C) better liquidity than directly negotiated debt contracts 
D) All of the listed options are correct.

Question 7

In an attempt to enhance the net social welfare benefits of the services provided by financial intermediaries, safety and soundness regulation requires a DI to hold a minimum level of cash reserves against deposits.

Accepted Answer

A) True 
 B)False

Question 8

Advantages of depositing funds into a typical bank account instead of directly buying corporate securities include all of the following except:

Accepted Answer

A) monitoring done by the bank on your behalf 
B) increased liquidity if funds are needed quickly 
C) increased transactions costs 
D) less price risk when funds are needed 
A) monitoring done by the bank on your behalf 
B) increased liquidity if funds are needed quickly 
C) increased transactions costs 
D) less price risk when funds are needed

The asset transformation function of FIs typically involves:

Which of the following statements is true in the context of diversification?

Which of the following statements is true?

Why do households prefer to use FIs as intermediaries to invest their surplus funds?

Economies of scale is the concept that:

Many households place funds with financial institutions because many FI accounts provide:

In an attempt to enhance the net social welfare benefits of the services provided by financial intermediaries, safety and soundness regulation requires a DI to hold a minimum level of cash reserves against deposits.

Advantages of depositing funds into a typical bank account instead of directly buying corporate securities include all of the following except:

The Financial Service Industry: Depository Institutions

The Financial Service Industry: Other Financial Institutions

Risks 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

Managing Interest Rate Risk Using Securitisation

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

Technology and Other Operational Risks

Capital Management and Adequacy

Filters

Exam 1: Why Are Financial Institutions Special

The asset transformation function of FIs typically involves:

Which of the following statements is true in the context of diversification?

Which of the following statements is true?

Why do households prefer to use FIs as intermediaries to invest their surplus funds?

Economies of scale is the concept that:

Many households place funds with financial institutions because many FI accounts provide:

In an attempt to enhance the net social welfare benefits of the services provided by financial intermediaries, safety and soundness regulation requires a DI to hold a minimum level of cash reserves against deposits.

Advantages of depositing funds into a typical bank account instead of directly buying corporate securities include all of the following except:

The Financial Service Industry: Depository Institutions

The Financial Service Industry: Other Financial Institutions

Risks 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

Managing Interest Rate Risk Using Securitisation

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

Technology and Other Operational Risks

Capital Management and Adequacy

Filters