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Unformatted text preview: ying asset will result in
a price change for any related derivatives so it follows that they can be used to manage risks as stated in B. See
page 29. 24
Financial institutions whose liabilities are mainly contracts that specify that, in return for the periodic payment
of fundsA) money market corporations will make payments if and when a specified event occurs are:
to the institution, the institution
B) unit trusts
Feedback: Financial institutions that are obliged to make payment(s) if and when a specified event occurs
C) contractual savings institutions
include life insurance offices, general insurers and superannuation funds. The contracts between these
D) policyholders require
institutions and theirfinancial intermediaries payment of regular premiums or contributions (the policyholder
agrees to save) so they are classified as contractual savings institutions, making C the correct answer. See
page 9. 25
Institutions that mainly provide off-balance-sheet advisory or fee-based services while also providing some
loans are: finance companies
Feedback: Depository financial banks and merchant banks
B) investment institutions such as commercial banks accept deposits and make loans, earning
a return from the spread between the interest rates on loans and deposits, both of which are on-balance sheet.
C) commercial banks
Finance companies operate in a similar way. Investment banks and merchant banks focus instead on offD) depository financial institutions
balance-sheet business, such as underwriting and providing advice on valuations and acquisitions, which
generates income through fees. In summary, A, C and D are all incorrect and B is the correct answer. See pages
Financial systems evolve in response to various ‘drivers of change’. These drivers of change have been
groupedA) the ageing of the populationis regulatory change. Examples of regulatory change include:
into categories, one of which in many countries
B) expansion of ATM and EFTPOS networks
the floating of exchange rates and authorising foreign banks to operate within a country
Feedback: The Wallis report grouped the factors that drive change in a financial system into four categories:
blurring of traditional roles as financial institutions offer a wider range of produc...
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This note was uploaded on 03/26/2012 for the course FIN 1612 at University of New South Wales.