Financial Institutions, Instruments and Markets 9th Edition by Christopher Viney Test bank

 
57. Financial intermediaries can engage in credit risk transformation because they:
A. obtain cost advantages owing to their size and business volumes transacted.
B. can quickly convert financial assets into cash, close to the current market price.
C. develop expertise in lending and diversifying loans.
D. can pool savers' short-term deposits and make long-term loans.
Ans: C
AACSB: Reflective thinking
Bloom's: Synthesis
Difficulty: Hard
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
58. When a financial intermediary collects together deposits and lends them out as loans to companies, it is engaging in:
A. liability management.
B. liquidity management.
C. credit transformation.
D. asset transformation.
Ans: D
AACSB: Reflective thinking
Bloom's: Knowledge
Difficulty: Easy
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
59. ‘Liquidity’ in financial terms is:
A. a feature of money only.
B. the ease with which an asset can be sold at the published market price.
C. the best measure of risk of a financial asset.
D. to lower the rate of return for an asset.
Ans: B
AACSB: Communication
Bloom's: Application
Difficulty: Easy
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
60. When an individual has immediate access to their funds from an account with a financial intermediary, the intermediary is engaging in:
A. asset transformation.
B. liability management.
C. liquidity management.
D. credit transformation.
Ans: C
AACSB: Communication
Bloom's: Knowledge
Difficulty: Easy
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
61. When a financial intermediary can repeatedly use standardised documents, it is engaging in:
A. liability management.
B. liquidity management.
C. credit transformation.
D. economies of scale.
Ans: D
AACSB: Communication
Bloom's: Comprehension
Difficulty: Easy
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
62. According to the textbook, all of the following are financial intermediaries except a/an:
A. bank.
B. insurance company.
C. superannuation fund.
D. share broking firm.
Ans: D
AACSB: Communication
Bloom's: Comprehension
Difficulty: Easy
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
63. An example of a financial intermediary is:
A. a stockbroker.
B. the Australian Securities Exchange.
C. the Australian Securities Commission.
D. an insurance company.
Ans: D
AACSB: Communication
Bloom's: Comprehension
Difficulty: Easy
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
64. The main participants in the financial system are individuals, corporations and governments. Individuals are generally ______ of funds and corporations are net ________ of funds.
A. borrowers; suppliers
B. users; providers
C. suppliers; users
D. demanders; providers
Ans: C
AACSB: Communication
Bloom's: Comprehension
Difficulty: Easy