1

1. For what reason do banks hold reserves?

A.to meet safety objectivesB.to meet liquidity objectivesC.All of the above are correct

4.17 points

QUESTION 2

1. An economic unit may access means of payment by

A.Using existing fundsB.Selling labor or product to get fundsC.BorrowingD.All the choices

4.17 points

QUESTION 3

1. A dual banking system refers to which of the following?
2. A.banks with sister banks out of stateB.banks insured by the FDICC.commercial banks being chartered and regulated by either the state or federal governmentD.banks working both within and outside the United States

4.17 points

QUESTION 4

1. The risk associated with unavailable funds when there is a need to make a payment is which of the following?
2. A.exchange rate riskB.default riskC.liquidity riskD.interest rate risk

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QUESTION 5

1. The largest source of funds for commercial banks is which of the following?
2. A.depositsB.loansC.fed fundsD.borrowings

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QUESTION 6

1. A moral hazard problem occurs when
2. A.the borrower uses falsified identification.B.the borrower engages in a riskier venture than what the borrowed funds were intended for.C.there is an increase in default.D.there is a decrease in default.

4.17 points

QUESTION 7

1. In order to be a commercial bank in the United States, a bank must be
2. A.Chartered.B.part government owned.C.Certificated.D.All of the above are correct.

4.17 points

QUESTION 8

1. The FDIC provides insurance for which of the following?
2. A.individual deposit accounts up to $500,000B.individual deposit accounts up to $250,000C.collective deposit accounts up to $500,000D.collective deposit accounts up to $100,000

4.17 points

QUESTION 9

1. A bank holding company is a corporation that owns which of the following?
2. A.one or two nonfinancial firms and one bankB.several banksC.interstate banksD.several firms that have activities closely related to banking and at least one bank

4.17 points

QUESTION 10

1. Which of the following is not a liability of Financial Intermediaries?
2. A.Transactions depositsB.Borrowed FundsC.Checking accountsD.Reserves

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QUESTION 11

1. A depreciation of the yen could expose an FI that is holding supplies of yen to which of the following types of risk?
2. A.default riskB.interest rate riskC.liquidity riskD.exchange rate risk

4.17 points

QUESTION 12

1. The risk associated with borrowers not repaying financial claims is which of the following?
2. A.exchange rate riskB.default riskC.liquidity riskD.interest rate risk

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QUESTION 13

1. Why are financial intermediaries regulated?
2. A.to provide a smooth running financial systemB.to protect the public from fraudC.to preserve the public's confidence in the safety and soundness of the systemD.All of the above are correct.

4.17 points

QUESTION 14

1. Which of the following statements best describes a bank's capital base?
2. A.the value of assets minus the value of liabilities
3. B.the value of assets plus the value of net worth
4. C.the value of liabilities minus the value of assets
5. D.the value of assets minus the value of net worth

4.17 points

QUESTION 15

1. Which of the following acts separated commercial and investment banking, and created the FDIC?
2. A.the Glass-Steagall ActB.the Interstate Banking and Branching Efficiency Act (IBBEA)C.the McFadden ActD.Gramm-Leach-Bliley Act

4.17 points

QUESTION 16

1. An adverse selection problem
2. A.increases the risk of default.B.decreases the risk of default.C.invites the borrower to engage in a riskier venture.D.can be resolved by the lender gaining more information about what the loan will be used for.

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QUESTION 17

1. The largest bank holding company currently is which of these
2. A.CiticorpB.ChaseC.Bank of AmericaD.Nations Bank

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QUESTION 18

1. An example of default risk is
2. A.a borrower refusing to make his car payments.B.a change in the interest rate such that a borrower pays off her mortgage loan early.C.a change in the exchange rate such that an FI's foreign assets lose value in dollar terms.D.an FI's inability to make payments without first selling long-term assets.

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QUESTION 19

1. Which is the largest asset held by life insurance companies?
2. A.corporate and foreign bondsB.government and agency securitiesC.equitiesD.mortgages

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QUESTION 20

1. If liabilities exceed the value of assets, the firm is
2. A.making an economic profit.B.profitable in the short run.C.profitable in the long run.D.insolvent.

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QUESTION 21

1. Which of the following risks is of most concern to an insurance company during a natural disaster?
2. A.liquidity risk
3. B.default risk
4. C.exchange rate risk
5. D.swap risk

4.17 points

QUESTION 22

1. What deposit charges a penalty if funds are withdraw before schedule maturity?
2. A.Time
3. B.Transcations
4. C.Saving
5. D.All of the options

2.337 points

QUESTION 23

1. A larger portion of the liabilities held by depository institutions in which of following?
2. A.Corporate Stock
3. B.Foreign financial assets
4. C.Saving Bonds
5. D.Deposits

4.166 points

QUESTION 24

1. Essay Question. (6 points)
2. 5. What isFinancial Intermediation?
3. Describe theadvantagesofFinancial Intermediation