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

A. Asset transformation
B. Maturity transformation
C. Credit risk transformation
D. Denomination transformation
 
54. The main role of financial intermediaries is to:
A. borrow funds from surplus units and lend them to borrowers.
B. provide advice to consumers on their finances.
C. provide funds for the government to cover budget deficits.
D. help ensure there are enough funds in circulation in a country.
 
55. Financial intermediaries pool the funds of:
A. many small savers and make loans to a few large borrowers.
B. a few savers and make loans to many borrowers.
C. many small savers and make loans to many borrowers.
D. a few large savers and make loans to a few large borrowers.
 
56. Small savers prefer to use financial intermediaries rather than lending directly to borrowers because:
A. financial intermediaries offer the savers a wide portfolio of financial instruments.
B. financial intermediaries offer much higher interest rates than can be obtained directly from borrowers.
C. borrowers dislike dealing with savers.
D. savers have a claim with the ultimate borrower via the financial intermediary.
 
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.
 
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.
 
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.
 
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.
 
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.
 
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.
 
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.
 
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
 
65. Which of the following borrowers would pay the lowest interest rate on debts of equal maturity?
A. The National Bank of Australia
B. Telstra
C. The City of Sydney
D. The Commonwealth Government
 
66. Generally, in the long term, a government:
A. is a net borrower of funds.
B. is a net supplier of funds.
C. borrows funds directly from households.
D. borrows funds directly from the financial market.
 
67. The _______ is created by a financial connection between providers and users of short-term funds.
A. share market
B. capital market
C. money market
D. financial market
 
68. Which of the following is NOT usually a short-term discount security?
A. Negotiable certificates of deposit
B. Commercial paper
C. Bank bills
D. Unsecured notes
 
69. Which of the following is NOT a feature of the money market?
A. It is a mainly wholesale market.
B. It deals with short-term financial claims.
C. It is important in financing the working-capital needs of businesses and governments.
D. It only operates as a market in which new security issues are created and marketed.
 
70. The market that involves the buying and selling of short-term securities is the:
A. securities market.
B. money market.
C. share market.
D. capital market.
 
71. A large company with a temporary surplus of funds is most likely to buy:
A. bank bills.
B. convertible notes.