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1. What contract feature of a mutual fund investment makes it farless likely that funds suffer runs like bank deposits did before the creation of

1. What contract feature of a mutual fund investment makes it farless likely that funds suffer "runs" like bank deposits did before the creation of the FDIC?

a. the stock market is inherently more stable than bank deposits

b. mutual fund companies must inject additional funds to keep investors' balances above par.

c. mutual fund investments are values on a proportional basis (net asset value per share), while bank deposits are a sequential claim contract.

d. risk tolerances are higher for investors now so they are more willing to let mutual fund investments "ride" without taking their funds out.

2. The risk that an investment made by a financial instition will fail to be repaid is:

a. solvency risk

b. operatioanl risk

c. liquidity risk

d. credit risk

3. Because banks raise funds almost completely by issuing/ accepting deposits that are (almost always) demandable at any time by the depositors, and use those funds to make loans, banks must measure and manage:

a. technology risk

b. operating risk

c. liquidity risk

d. credit risk

4. A community bank operating in a market like McGee, AR is least likely to face:

a. operating risk

b. liquidity risk

c. foreign exchange risk

d. credit risk

5. Many corporate defined __________ pension plans are ___________, placing risk on the __________ should the corporations behind the plans fail.

a. contribution, fully funded, FDIC

b. contribution, underfunded, PBGC

c. benefit, fully funded, FDIC

d. benefit, underfunded, PBGC

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