726 Midterm 1 WQ08 (Answer Key)

726 Midterm 1 WQ08 (Answer Key) - Midterm 1 WQ08 Midterm 1...

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Midterm 1 WQ08 M idterm 1 WQ08 KEY 1. Financial intermediaries specialize in the production of money. FALSE 2. The brokerage function of an FI reduces transaction and information costs between a corporation and individual which encourages a lower rate of savings than would otherwise exist. FALSE 3. Privately placed bonds and equity can be traded on the secondary market because of amendments to Regulation 144A. TRUE 4. Negotiable certificates of deposits are distinguished from fixed time deposits by their negotiability and active trading in the secondary markets. TRUE 5. The securitization of mortgages involves the pooling of mortgage loans for sale in the financial markets. TRUE 6. In recent years, the number of commercial banks in the U.S. has been increasing. FALSE 7. The credit union industry avoided much of the financial distress of the 1980s because of the short maturity and relatively less credit risk of their assets. TRUE 8. Life insurance companies also manage private pension plans which include the offer of guaranteed investment contracts (GICs). TRUE 9. In group life insurance, lower rates can be offered because of cost economies as a result of mass administration of plans and reduced selling and commission costs. TRUE 10. The Insurance Regulatory Information System (IRIS) is a standardized exam to measure the profitability of insurance companies. FALSE 11. The policy reserves on the liability side of the balance sheet of a life insurance company are estimated based on actuarial assumptions to meet the expected future liability commitments on present contracts. TRUE 12. Activity and performance trends in the investment banking industry are highly correlated with general economic expansions and recessions. TRUE 13. Securities firms have equity ratios that are lower than those for commercial banks because their balance sheets contain a larger portion of liquid assets. TRUE 14. SEC Rule 415 allows corporations to register their new issues with the SEC up to 2 years in advance. TRUE 15. National full-line firms provide business service to both retail customers and corporate customers. TRUE
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16. The benefits of greater management attention in load funds do not outweigh the cost disadvantages of the load fee. TRUE 17. In terms of asset size, the mutual fund industry ranks ahead of the commercial banking industry. FALSE 18. Daily marking-to-market refers to the process of determining the value of mutual fund shares each per day. TRUE 19. Finance companies have relied primarily on commercial paper and other debt sources to finance asset growth. TRUE 20. Finance companies now rely more heavily on bank loans as a source of financing than in 1977. FALSE 21. Loan shark finance companies prey on desperate, higher-risk customers, charging unfairly exorbitant interest rates. TRUE
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This note was uploaded on 07/07/2011 for the course FINS 5513 taught by Professor Mrsim during the Three '11 term at South Australia.

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726 Midterm 1 WQ08 (Answer Key) - Midterm 1 WQ08 Midterm 1...

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