21. Over years, you have saved a $50,000, 2-year GIC and $100,000 money market mutual funds in your own RRSP account. You and your spouse have a joint chequing account of $25,000. To build funds for education, you have also opened a trust account of $175,000 for your two children as beneficiaries with equal division. How much of your money will be exposed to risk?

____

1. $100,000
2. $125,000
3. $150,000
4. $175,000

22. The bail-in regime for Canadian banks is used for

____

1. The seizure of bank deposits by CDIC
2. The prevention of collusion among institutions
3. The recapitalization of equity funds to acceptable level
4. The control of risk-taking activities

23. Interest rate risk is a big concern to life insurance companies because

____

1. Their financial assets tend to be long-term
2. They are almost as highly leveraged as are commercial banks
3. The premiums received by the insurers are insufficient to pay claims presented
4. Provincial insurance commissions generally require the companies to remain highly liquid

24. While an individual banks illiquidity may cause a bank _____, a general loss of faith in banks ability to pay is called a ____.

____

1. Loss; run
2. Run; panic
3. Panic; run
4. Closure; bail out

25. Because information is scarce,

____

1. Equity contracts are used much more frequently to raise capital than are debt contracts
2. Financial intermediaries are trapped by the problem of free riding
3. Borrowers have stronger incentives to take highly risky investments
4. Lenders have difficulties in sorting out good credit risks from bad credit risks

26. The process of underwriting a stock or bond issue requires that the securities firms

____

1. Assure the public that the issue is legitimate and not a fraudulent confidence game
2. Purchase the entire issue at a pre-determined price if the quantity demanded by consumers is insufficient at the pre-determined price
3. Purchase the entire issue at a pre-determined price and then resell it in the secondary market
4. Help management assess the risk level of the securities

27. Investment banks sell ____ securities to the public, while brokerage firms sell ____ securities to the public.

____

1. New; existing
2. New and existing; existing
3. Existing; new
4. Existing; new and existing

28. From the standpoint of ____, specialization in lending is surprising but makes perfect sense when the bank considers the ____ problem.

____

1. Diversification; adverse selection
2. Credit rationing; diversifying
3. Diversification; moral hazard
4. Adverse selection; moral hazard

29. From an investment bankers perspective, the best outcome occurs when a new issue is

____

1. Under subscribed
2. Fully subscribed
3. Over subscribed
4. Syndicated

30. PVG Funds charges a 12.2% front-end load. Its total assets equal $450,000 and total liabilities equal $25,000. It has 22,000 shares outstanding. What is the offer price per share of PVG Fund?

____

1. $18.84
2. $19.32
3. $20.89
4. $22.00

Hint: NAV= (TA TL)/shares outstanding