Financial Institutions Management: A Risk Management Approach 10th Edition by Anthony Saunders Test
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60. Economic collapse during the 1930s, the banking system in the U.S. performed directly or indirectly all financial services. Those functions included all of the following EXCEPT
A. commercial banking.
B. money market funds.
C. investment banking.
D. stock investing.
E. insurance services.
61. Depository financial institutions include all of the following EXCEPT
A. commercial banks.
B. savings banks.
C. investment banks.
D. credit unions.
E. all of the options are depository institutions.
62. Nondepository financial institutions are represented by all of the following EXCEPT
A. insurance companies.
B. mutual funds.
C. finance companies.
D. credit unions.
E. securities firms.
63. Which of the following statements is FALSE?
A. A financial intermediary specializes in the production of information.
B. A financial intermediary reduces its risk exposure by pooling its assets.
C. A financial intermediary benefits society by providing a mechanism for payments.
D. A financial intermediary may act as a broker to bring together funds deficit and funds surplus units.
E. A financial intermediary acts as a lender of last resort.
64. Which function of an FI reduces transaction and information costs between a corporation and individual which may encourage a higher rate of savings?
A. Brokerage services.
B. Asset transformation services.
C. Information production services.
D. Money supply management.
E. Administration of the payments mechanism.
65. In its role as a delegated monitor, an FI
A. keeps track of required interest and principal payments on loans it originates.
B. works with financially distressed borrowers in danger of defaulting on their loans.
C. holds portfolios of loans that they continue to service.
D. maintains contact with borrowers to ensure that loan proceeds are utilized for intended purposes.
E. All of the options.
66. Which of the following is NOT a major function of financial intermediaries?
A. Brokerage services.
B. Asset transformation services.
C. Information production.
D. Management of the nation's money supply.
E. Administration of the payments mechanism.
67. Advantages of depositing funds into a typical bank account instead of directly buying corporate securities include all of the following EXCEPT
A. monitoring done by the bank on your behalf.
B. increased liquidity if funds are needed quickly.
C. increased transactions costs.
D. less price risk when funds are needed.
E. better diversification of deposited funds.
68. Many households place funds with financial institutions because many FI accounts provide
A. lower denominations than other securities.
B. flexible maturities verses other interest-earning securities.
C. better liquidity than directly negotiated debt contracts.
D. less price risk if interest rates change.
E. All of the options.
69. The reason FIs can offer highly liquid, low price-risk contracts to savers while investing in relatively illiquid and higher risk assets is
A. because diversification allows an FI to predict more accurately the expected returns on its asset portfolio.
B. significant amounts of portfolio risk are diversified away by investing in assets that have correlations between returns that are less than perfectly positive.
C. because individual savers cannot benefit from risk diversification.
D. because FIs have a cost advantage in monitoring their portfolios.
E. All of the options.
70. The federal government has traditionally extended safety nets to DIs consisting of
A. deposit insurance, discount window borrowing, and reserve requirements.
B. deposit insurance and discount window borrowing.
C. deposit insurance, unemployment insurance, and discount window borrowing.