Finance 365 Exam 1

Economic collapse during the 1930s, the banking system in the US 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

B

Depository financial institutions include all of the following except: commercial banks, savings banks credit unions. investment banks

Investment banks

Which function of an FI reduces transaction and information costs between corporation and individual which may encourage a higher rate of savings? a. brokerage services b. asset transformation services c. inför prod. services d. money supply management e. administration of the payments mechanism

a. brokerage services

In its role as a delegated monitor, an FI a. keeps track of req. 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 above

all of the above

Non depository 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

d. credit unions

Which of the following statements is false: a. a financial intermediary specializes in the production of info. b. "reduces its risk exposure by pooling its assets c. " benefits society by providing a mechanism for payments d. "may act as a broker to bring together funds deficit and funds surplus units e. a finanial intermediary acts as a lender of last resort

e. a financial intermediary acts a s a lender of last resort

The reason FIs can offer highly liquid, low price risk contracts to saves 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 acts 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 above

e. all of the above

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 sec. c. better liquidity than directly negotiated debt contracts d. less price risk if interest rates change e. all of the above

e. all of the above

advantages of depositing funds into a typical bank account instead of directly buying corporate securities include all of the following except

increased transaction costs

Not a function of financial intermediaries

Management of the nation's money supply