See page 29 24 4 24 incorrect financial institutions

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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 4 24 INCORRECT 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 4 25 INCORRECT Institutions that mainly provide off-balance-sheet advisory or fee-based services while also providing some loans are: finance companies A) 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 9–11. 26 4 26 INCORRECT 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 C) the floating of exchange rates and authorising foreign banks to operate within a country D) 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.

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