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1.Recently, defined contribution plans are becoming more predominant and defined benefit plans are declining in terms of assets managed. False True 2.A person can invest

1.Recently, defined contribution plans are becoming more predominant and defined benefit plans are declining in terms of assets managed.

False True

2.A person can invest $12,000 per year for 30 years (beginning one year from now) at which time he will retire. He plans on living for 25 years after he retires. If interest rates are 8 percent, what size annual annuity payment can he obtain for his retirement years? (All annuity payments are at year-end. Round your answer to the nearest dollar.)

$64,439 $150,913 $161,096 $137,488 $134,569 $116,641

3.Property and casualty insurers hold more short-term assets than life insurers because property and casualty loss rates are more predictable than life insurance loss rates.

True False

4.Like bonds and stocks, primary mortgages have no set size or denomination.

False True

5.The term ________ refers to the withdrawal of deposits from depository institutions that are reinvested in other types of intermediaries.

intermediation, withdraw ,disintermediation ,reinvestment ,insolvency ,illiquidity

6.At your new job you estimate that your average salary over your working years will be $95,000 per year. How many more years would you have to work to receive as much benefit from a 3 percent of your average salary times years of service as you would receive a flat benefit of $3,000 times years of service?

1.33 times as many years ,0.75 times as many years ,1.19 times as many years ,1.05 times as many years ,1.50 times as many years ,0.95 as many years

7.In terms of profitability, a well-run bank in the Unites States usually has a ROA of 10 to 15 percent.

True False

8.With an ARM the ______ bears the interest rate risk, and with a fixed-rate mortgage the ______ bears the interest rate.

lender; borrower/ borrower; lender /borrower; borrower/ lender; lender /

9.government; investor The lower the asset utilization ratio, the ______ the ________ratio.

lower; return on assets lower; profit margin higher; profit margin higher; return on equity higher; return on assets lower; equity multiplier

10.One of the following pension plan types is the riskiest for an employee?

Defined contribution plan invested in fixed-income securities ,Defined contribution plan, invested in equities ,Final pay defined benefit pla,n Career average defined benefit plan, Overfunded defined benefit plan Defined benefit plan invested in equities

11.The Financial Services Modernization Act allowed bank holding companies to open insurance underwriting affiliates and allowed insurance companies to open banks.

False True

12.The spot rate for the Korean won is 1,100 per dollar. Over the year, inflation in Korea is 4 percent and U.S. inflation is 2 percent. If purchasing power parity holds, at year-end the exchange rate should be approximately ______ won per dollar. 1,044 1,022 1,122 1,033 1,156 1,078

13.The average daily net transaction accounts of a local bank during the most recent reserve computation period is $687 million. What is the average daily reserve balance required to be held by the bank during the maintenance period? Assume no vault cash. $47.79 million $54.64 million $40.12 million $62.34 million $68.7 million $60.53 million

14.You now have a choice between (1) a flat benefit at retirement equal to $4,000 times your years of service, or (2) a career average formula of 5 percent of your average salary times your years of service. You expect to work 40 years. At what average salary would you be getting the same benefit under both alternatives (1) and (2)? $66,667 $80,000 $58,000 $104,000 $98,000 $65,000

15.In a defined contribution pension plan, the risk of the shortfall is borne by the employee. False True

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