Question 20 (1 point) The agreement to provide a standardized commodity to a buyer on a specific date at a specific future price is O a call option O a futures contract O a mortgage-backed security O a put option Question 21 (1 point) The Finance Act of 1914 required that O local banks be subject to the same regulations as national banks the Department of Finance to act as a lender of last resort national banks establish branches in large cities Activate Windo the Bank of Canada to act as a lender of last resort Question 22 (1 point) Question 46 (1 point) Property that is pledged to the lender in the event that a borrower cannot make his or her debt payment is called interest O points collateral good faith money Question 47 (1 point) A solution to the high transaction costs is to bundle the funds of many investors so that they can take advantage of Actate Wind high rates of return lower risk economies of scale high interest rates Question 24 (1 point) The process in which people take their funds out of the banking system seeking higher-yielding securities is called disintermediation deposit jumping loophole mining capital mobility Question 25 (1 point) A firm issuing credit cards earns income from loans it makes to credit card holders subsidies from the local governments sales of the card in foreign countries payments made to it by manufacturers of the products sold in stores on credit card purchases Active Wind Previous Page Next Page Page 5 of 7 Question 18 (1 point) Deposits in European banks denominated in dollars for the purpose of international transactions are known as 2: 3 4 European Monetary Units International Monetary Units European Currency Units Eurodollars : 7 8 Question 19 (1 point) Financial instruments whose payoffs are linked to previously issued securities are called reversible bonds 10 11 hedge securities Activate Windows grandfathered bonds financial derivatives Question 26 (1 point) Holding companies are viable options for financial groups if the transition to a holding company would be _____ and exhibit tax-neutral; decreased costs tax-free; decreased costs tax-neutral: economies of scope tax-free; fewer joint ventures Question 27 (1 point) The development of money market mutual funds contributed to the growth of - since the money market mutual funds need to hold liquid, high-quality, short-terms assets. Activate Window the corporate bond market the commercial paper market the municipal bond market the junk bond market Question 38 (1 point) Moral hazard in equity contracts is known as the problem because the manager of the firm has fewer incentives to maximize profits than the stockholders might ideally prefer. adverse selection free-rider debt deflation O principal-agent Question 39 (1 point) High net worth helps to diminish the problem of moral hazard problem by collateralizing the debt contract requiring the state to verify the debt contract giving the debt contract characteristics of equity contracts making the debt contract incentive compatible Activate Windo Omastion 40 inaint Question 33 (1 point) Banking consolidation in Canada will result in elimination of small banks an increase in bank size an increased number of small banks a reduction in bank size Question 34 (1 point) Which of the following are true statements? A Schedule Il bank may have a significant shareholder (more than 10 percent) for up to 10 years after chartering. Widely held foreign banks can own 50 percent of a Canadian bank subsidiary. Schedule I banks have more powers than Schedule Il banks. A Schedule III bank is a foreign bank is not allowed to branch directly into Canada. Activate in Question 35 (1 point) Question 30 (1 point) The Bank Act Reform took effect in May 2001 October 2001 January 2001 December 2001 Question 31 (1 point) The difference between a Schedule II and a Schedule III bank is that a Schedule III bank is a foreign bank is not allowed to branch directly into Canada widely held foreign banks can own 50 percent of a Canadian bank subsidiary a foreign bank may enter the Canadian banking industry only as a Schedule III bank a Schedule Il bank is a Canadian subsidiary of a foreign bank Activate Window Question 32 (1 point)