True/False Questions

1. If the benefits are determined by the contributions into the plan and their earnings, the

pension is a defined-contribution plan

2. Credit unions raise funds, usually, from deposits of their members and lend the majority

of those funds to members

3. Adverse selection refers to the fact that bad credit risks are the ones most likely to seek

loans

4. Mutual funds are financial intermediaries that pool the resources of many small investors

by selling them shares and using the proceeds to buy securities.

5. In D-B plan, the sponsor guarantees the retirement benefits makes the investment choice

and bear the investment risk.

6. Because there would be more uncertainty about how much they would have to pay out in

any given year, life insurance companies would tend to hold shorter-term assets that are

more liquid than property insurance.

7. Because diversification is a desirable strategy for avoiding risk, it never makes sense for

a bank to specialize in making specific types of loans.