Fin 308 test 1 answer key

Dealers thrifts and banks e mortgage companies

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Unformatted text preview: nd banks E) Mortgage companies, investment companies and pension funds. Answer: B Page: 13 Level: Medium 17. Advantages of putting your money in a bank deposit instead of directly buying capital market securities typically include A) Delegated monitoring B) Better liquidity C) Less price risk D) All of the above E) None of the above Answer: D Page: 14 Level: Easy Saunders, Financial Markets and Institutions, 2/e 3 18. A bank that makes a two year loan in yen and funds it with 6 month Eurodollar deposits incurs A) Foreign exchange risk B) Interest rate risk C) Liquidity risk D) All of the above E) None of the above Answer: D Page: 10,14 Level: Medium 19. New Age Banking (NAB) recently invested heavily in Internet technology in order to offer on line services to corporate and individual customers. So far, only two corporate customers and very few individuals have begun using their Internet services. In addition, NAB lost an entire corporate payroll last month. These are examples of: A) Credit risk and market risk B) Country risk and insolvency risk C) Technological risk and operational risk D) Liquidity risk and interest rate risk E) None of the above Answer: C Page: 19-20 Level: Medium 20. _________ and __________ allow a financial intermediary to offer safe, liquid liabilities such as deposits while investing the depositors money in riskier, illiquid assets. A) Diversification ; high equity returns B) Price risk ; collateral C) Free riders ; regulations D) Monitoring ; diversification E) Primary markets ; foreign exchange markets Answer: D Page: 15-16 Level: Medium 21. Depository institutions include: A) Banks B) Thrifts C) Finance companies D) All of the above E) A and B only Answer: E Page: 12 Level: Medium 4 Saunders, Financial Markets and Institutions, 2/e Chapter 1 Introduction 22. Match the intermediary with the characteristic that best describes its function. I. Provide protection from adverse events II. Pool funds of small savers and invest in either money or capital markets III. Provide consumer loans and real estate loans funded by deposits IV. Accumulate and transfer wealth from work period to retirement period V. Underwrite and trade securities and provide brokerage services 1. Thrifts 2. Insurers 3. Pension funds 4. Securities firms and investment banks 5. Mutual funds A) 1, 3, 2, 5, 4 B) 4, 2, 3, 5, 1 C) 2, 5, 1, 3, 4 D) 2, 4, 5, 3, 1 E) 5, 1, 3, 2, 4 Answer: C Page: 12 Level: Medium 23. As of 2001, in dollar terms, U.S. investors held over ___________ trillion in foreign financial assets and foreign investors held over __________ trillion in U.S. financial assets. A) $7.6 ; $6.5 B) $6.5 ; $7.6 C) $3.2 ; $5.2 D) $8.1 ; $5.5 E) $5.5 ; $8.1 Answer: E Page: 21 Level: Medium 24. Financial intermediaries (FIs) can offer savers a safer, more liquid investment than a capital market security, even though the intermediary invests in risky illiquid instruments because: A) FIs can diversify away some of their risk B) FIs closely monitor the ri...
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This note was uploaded on 09/23/2013 for the course FIN 308 taught by Professor Spivey during the Fall '08 term at Clemson.

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