Fintech Midterm 1

The demand curve for bonds would be reduced by

1) an increase in wealth. 2) an increase in the liquidity of bonds relative to other assets. 3) an increase in the information costs of bonds relative to other assets. 4) a decrease in expected returns on other assets.

Approximately what percentage of US households are considered to be underbanked?

Question options: 1) 10% 2) 15% 3) 25% 4) 35% 5) 50%

At the time of the book publication, how many kinds of crypto currency's and altcoins are there?

Question options: 1) 200 2) 4,500 3) 10,000 4) 1,000 5) 400

As of August 15, 2017, what percentage of the Indian population utilizes the Aadhaar card program?

Question options: 1) 45% 2) 70% 3) 15% 4) 35% 5) 88%

Which firm did the Treasury allow to fail during the financial crisis?

Question options: 1) American International Group (AIG) 2) Bear Stearns 3) Lehman Brothers 4) J.P. Morgan

When did the UK Financial Conduct Authority (FCA) conduct an experiment in machine-executable regulation?

Question options: 1) April 1992 2) November 2017 3) April 2017 4) November 1992 5) December 1906

What is the term for digital currency that uses encryption?

Question options: 1) Bitcoin 2) Ethereum 3) Blockchain 4) Cryptocurrency 5) Insurtech

"Bank 4.0" closely relates Bitcoin to all of the following except:

Question options: 1) Currency. 2) Marketplace. 3) A means for money laundering. 4) A threat to central banks. 5) A blue-chip stock investment.

What characteristic of Bitcoin could prevent it from becoming first, truly digital, global currency?

Question options: 1) Current users believe in Bitcoin scarcity, speculate on its future value and hoard it 2) Bitcoin is decentralized and independent of any government authorities 3) Users obtain Bitcoin through mining. A procedure by which clients unravel scientific conditions utilizing programming and acquire remunerates consequently 4) Bitcoin exchange is irreversible, which guaranties the gathering of the installment 5) Central banks might want to attempt to ban, or at minimum, inhibit Bitcoin

The typical regulatory structure at market level has these four processes in the cycle. Which of the following is one of those processes?

Question options: 1) Day to day supervision. 2) Policy and standards development. 3) Reporting and policing. 4) Policy change or process improvement. 5) All of the above.

These are the critical of elements of reform EXCEPT

Question options: 1) Digitally-native regulation 2) Machine-executable regulation 3) Regulatory agility, open platforms, and code 4) Practical implementation roadmap 5) Firmness in mission, cultures, skills and protocols

The word "DAO" stands for

Question options: 1) Documented Autonomous 2) Decentralized Automatic 3) Decentralized Autonomous 4) Documented Automatic 5) Documentarized Automatic

Banks have provided three core key pieces of utility:

Question options: 1) Drive-thru ATMs, a teller, and brick and mortar locations 2) A value store, money movement and access to credit 3) Checking accounts, savings accounts, and paper checks 4) Home loans, car loans, personal loans and small business loans 5) None of the above

Which one of the following is not included in a typical regulatory structure?

Question options: 1) Government & Policy Makers 2) Examiners & Supervisory Authorities 3) Analysis, Market Risk, Legal, and Q&A Divisions 4) Regulatory & Judicial Board 5) Fraud, Financial Crime & Prosecution Arm

Which of the following does not make Bitcoin difficult to regulate?

Question options: 1) High demands of consumers 2) Decentralized nature of Bitcoin 3) Back of a clear internal oversight 4) Appearance of anonymity 5) Unclear classification of Bitcoin

A financial market has the following characteristic:

Question options: 1) It allows loan to be made. 2) It determine the level of interest rates. 3) It allow commons stock to be traded. 4) Both (A) and (C) is correct 5) None of the above

What is one regulatory issue with Decentralized Autonomous Organizations (DAO)?

Question options: 1) It exists on the internet, and therefore is impossible to regulate 2) Companies that make proprietary technology are not subject to regulation. 3) Technology is simply too complex for regulators to understand and effectively write rules for 4) Because these organizations are autonomous, there is no board of governs or owner of the company to clearly hold responsible for actions of the organization. 5) These organizations are international and fall outside the jurisdiction of governments

Which of the following statements best describes the authors view for the future of Bitcoin.

Question options: 1) It should be fairly easy to regulate. 2) It is built on a near perfect platform. 3) Within the next two years the price will double. 4) Currently Bitcoin has a high utility. 5) Bitcoin will likely act as a learning foundation for future digital currency.

Which of the following is NOT one of the six FinTech keys to success?

Question options: 1) Lower cost to serve. 2) More in person customer interactions. 3) Advanced analytics. 4) Understanding risk and regulations. 5) Improved modes of customer acquisition.

Which of the following does NOT describe the relationship between banks and small business during the 2000s (prior to the financial crisis)?

Question options: 1) Many small businesses were receiving loans from regional and national banks. 2) More banks became convinced that it would be profitable to loosen their loan guidelines to make more borrowers eligible to receive credit. 3) Fewer small businesses received loans as banks shifted their focus to mortgages. 4) Banks typically applied fixed guidelines for granting loans, leaving little room for personal judgment.

Which of the following is NOT a financial intermediary?

Question options: 1) NASDAQ 2) Bank of America 3) Vanguard Total Stock Market Index Fund 4) Allstate Insurance Company

What is it called when banks block high risk customers due to their industry, location or circumstance?

Question options: 1) New redlining 2) Exiling 3) Flow monitoring 4) Regulating 5) Enforcing

The obstacles to regulatory innovation are:

Question options: 1) Numerous 2) Massive 3) Intertwined 4) A & B 5) A, B, and C

Under what umbrella term do we classify Bitcoin?

Question options: 1) Payment network 2) New asset class 3) Marketplace 4) Currency 5) All of the above

The critical elements of reform grounded in first principles include all but which?

Question options: 1) Principles-based, data-driven supervision 2) Digitally-native regulation 3) Machine-executable regulation 4) AML network monitoring 5) Rigid adherence to pre-existing rules and regulations

What is one thing that interest rates influence?

Question options: 1) The size of the U.S. budget deficit. 2) The amount of new currency that will be printed in the coming year. 3) The amount of taxes people will have to pay. 4) Personal spending. 5) None of the above.

What is preventing Bitcoin from becoming the first truly digital global currency?

Question options: 1) The trend of hoarding Bitcoin 2) Speculation about its future value 3) Its low utility compared with fiat currencies 4) The instability of its value 5) The lack of a catchy design or slogan

Why would a central bank perceive bitcoin or any other crypto currency to be a risk:

Question options: 1) You can use it at every store in America 2) It can compete with fiat currencies because it can be used globally 3) It cannot be hacked or stolen 4) It is not volatile 5) All of the above

The expected change in the supply and demand for bonds due to an increase in expected inflation will definitely result in

Question options: 1) a decrease in the equilibrium price of bonds. 2) an increase in the equilibrium price of bonds. 3) an increase in the equilibrium quantity of bonds. 4) a decrease in the equilibrium quantity of bonds.

Diversification is most effective in reducing

Question options: 1) all forms of risk. 2) market risk. 3) systemic risk. 4) idiosyncratic risk.

The wealth of most people declined as a result of the financial crisis of 2007-2009. As a result, which asset most likely became a larger portion of their portfolio?

Question options: 1) bonds 2) stocks 3) checking account 4) house

From 1978 to 2016, the percentage of wealth held by households decreased for all of the following categories of assets EXCEPT

Question options: 1) bonds. 2) deposits. 3) corporate stocks. 4) equity in unincorporated businesses.

Because securitized loans are loans that have been bundled with other loans and sold to investors, they are

Question options: 1) both financial assets and financial securities. 2) financial securities but not financial assets. 3) financial assets but not financial securities. 4) neither financial assets nor financial securities.

Which of the following assets is the most liquid?

Question options: 1) computer 2) U.S. Treasury bond 3) washing machine 4) money market mutual fund

FinTech companies are creating competitive pressure and building competition in the financial industry that is causing banks to change. This trend is being encouraged by:

Question options: 1) establishing the UK as the most important FinTech hub. 2) regulators encouraging financial technology companies to flourish. 3) creating consciousness in big banks about the personal struggles that the consumer faces involving money. 4) limiting FinTech startups to develop only in economically advanced regions. 5) None of the above.

Which of the following is not a characteristic of semantic banking?

Question options: 1) frictionless 2) contextual 3) immersive 4) ubiquitous 5) face-to-face

Financial markets

Question options: 1) generally provide lenders with lower returns than do financial intermediaries. 2) channel funds directly from lenders to borrowers. 3) channel funds indirectly between borrowers and lenders. 4) act as go-betweens by holding a portfolio of assets and issuing claims based on that portfolio to savers.

When nominal interest rates on financial assets are low, the opportunity cost of holding money is ________, so the quantity of money demanded by households and firms will be ________.

Question options: 1) high; low 2) high; high 3) low; low 4) low; high

Economists believe that as a saver's wealth increases, the saver will generally

Question options: 1) increase the fraction of wealth held as cash. 2) decrease the fraction of wealth held as corporate bonds. 3) increase the fraction of wealth held as common stock. 4) increase his or her holdings of all assets proportionately.

All of the following were significant changes in the mortgage market in the 2000s EXCEPT

Question options: 1) investment banks became significant participants in the secondary mortgage market. 2) mortgage-backed securities became more popular with investors. 3) lenders loosened lending standards. 4) borrowers tended to increase the amount of their down payments.

The Federal Reserve System

Question options: 1) is headed by the Secretary of the Treasury. 2) is responsible for conducting fiscal policy for the United States. 3) is the central bank of the United States. 4) is in charge of managing the New York Stock Exchange.

All of the following took place during the economic crisis that began in 2007 EXCEPT

Question options: 1) large portions of the U.S. economy were cut off from the funds they needed to thrive. 2) there was a devastating decline in the production of goods and services throughout the economy. 3) the financial system was disrupted. 4) unlike households, most businesses still had easy access to funds.

If you buy a bond issued by Intel, the bond is a(n)

Question options: 1) liability to both you and Intel. 2) asset to both you and Intel. 3) liability to Intel and an asset to you. 4) liability to you and an asset to Intel.

As a result of the perceived riskiness of alternative investments following the financial crisis of 2007-2009, the bond market was affected in all of the following ways EXCEPT

Question options: 1) lower nominal interest rates. 2) higher demand for bonds. 3) higher price of bonds. 4) higher real interest rates.

In response to the financial crisis of 2008, banks __________.

Question options: 1) lowered interest rates. 2) supplied more subprime loans to unworthy borrowers. 3) raised their stock prices. 4) stockpiled cash reserves. 5) enacted stricter monetary policies.

Monetary policy refers to the government's

Question options: 1) plans for retiring the national debt. 2) decisions on how much money to collect in taxes. 3) management of the money supply and interest rates to achieve macroeconomic objectives. 4) decisions on how much money to spend.

When expected inflation increases, investors ________ their demand for bonds because, for each nominal interest rate, the higher the inflation rate, the ________ the real interest rate investors will receive.

Question options: 1) reduce; lower 2) increase; higher 3) increase; lower 4) reduce; higher

If the federal government decreases its spending and doesn't decrease taxes, the bond supply shifts to the

Question options: 1) right and the equilibrium interest rate rises. 2) left and the equilibrium interest rate falls. 3) right and the equilibrium interest rate falls. 4) left and the equilibrium interest rate rises.

If the Fed decreases the money supply and as a result, households and firms buy fewer short-term financial assets, the prices of those short-term financial assets will ________ and the interest rates on those assets will ________.

Question options: 1) rise; fall 2) fall; rise 3) fall; fall 4) rise; rise

Suppose there's an 80% chance of a stock rising by 20% and a 20% chance of it falling by 40%. Which type of investor would prefer an investment with a guaranteed return of 5%?

Question options: 1) risk averse investor 2) risk neutral investor 3) risk loving investor 4) Risk is not relevant in this example.

An investor who bases the decision to buy an asset solely on the expected return of an asset is considered to be

Question options: 1) risk loving. 2) risk neutral. 3) risk avoiding. 4) risk averse.

Which type of investor is most likely to have a diversified portfolio?

Question options: 1) risk neutral 2) risk tolerant 3) risk averse 4) risk loving

Borrowers who stated but did not document their incomes are referred to as

Question options: 1) subprime. 2) adjustable. 3) alt-A. 4) securitized.

The Troubled Asset Relief Program (TARP) allowed

Question options: 1) the Fed to make loans to banks as the lender of last resort. 2) the Fed to provide funds to commercial banks in return for stock. 3) the Treasury to insure bank deposits at major U.S. banks. 4) the Treasury to inject funds into commercial banks in return for stock in the banks.

If the government increases taxes while holding expenditures constant

Question options: 1) the bond supply curve will shift to the right and the real interest rate will fall. 2) the bond supply curve will shift to the left and the equilibrium interest rate will fall. 3) government borrowing will be increased. 4) the government's deficit will increase.

Economists define risk as

Question options: 1) the ease with which an asset can be exchanged for other assets or for goods and services. 2) the difference between the return on common stock and the return on corporate bonds. 3) the chance that the value of financial assets will change from what you expect. 4) the difference between the interest rate borrowers pay and the interest rate lenders receive.

During a period of economic expansion, when expected profitability is high

Question options: 1) the equilibrium price of bonds rises. 2) the equilibrium interest rate falls. 3) the supply curve of bonds shifts to the right. 4) the demand curve for bonds shifts to the left.

Economists define liquidity as

Question options: 1) the fraction the asset makes up of an investor's portfolio. 2) the difference between the return on the asset and the return on a long-term U.S. Treasury bond. 3) the difference between the total demand for an asset and the total supply of the asset. 4) the ease with which an asset can be exchanged for money.

If there is an excess supply of bonds at a given price of bonds, then

Question options: 1) the interest rate will fall. 2) the interest rate may rise or the interest rate may fall depending upon the reasons for the excess supply for bonds. 3) the interest rate will rise. 4) the price of bonds will rise.

If there is an excess demand for bonds at a given price of bonds, then

Question options: 1) the interest rate will rise. 2) the interest rate will fall. 3) the interest rate may rise or the interest rate may fall depending upon the reasons for the excess demand for bonds. 4) the price of bonds will fall.

All of the following are true regarding securitized loans EXCEPT

Question options: 1) they provide liquidity. 2) they provide risk sharing. 3) they provide information. 4) they cannot be resold.

By the end of 2009, loan losses were ________ at the end of 2007.

Question options: 1) two times less than 2) equal to those 3) twenty-five times greater than 4) four times greater than

Until very recently, investment banks rarely engaged in which of the following?

Question options: 1) underwriting 2) proprietary trading 3) lending to households 4) securitization

What did Steve Jobs carry around the Apple offices to remind people of the need for simplicity?

Question options: 1) A toy car 2) A book 3) A block of wood 4) An iPhone 5) A brick

What are the 3 core key pieces of banking utility?

Question options: 1) A value store, A prestigious institution, Limited Credit 2) A value store, Money Movement, Access to credit 3) A prestigious institution, Money Movement, Limited Credit 4) A prestigious institution, Money Stagnation, Access to credit 5) A value store, Money Stagnation, Access to credit

Creditworthiness is a critical factor driving Ant Financial and the Chinese economy forward. What development has primarily allowed Ant Financial to better evaluate consumer credit?

Question options: 1) Blockchain 2) QR codes 3) Mobile payment systems 4) Big Data 5) Consumer behaviors

How has bank utility in today's terms been reimagined?

Question options: 1) Branch locations and ATMs 2) smartphone, the IP layer, data, interfaces and AI 3) utility looks the same as it did 30 years ago 4) interactions with human tellers 5) bank drive thrus

Which family is largely attributed as having invented modern banking?

Question options: 1) Medici Family 2) Garibaldi Family 3) Dolce Family 4) Berlusconi Family 5) Armani Family

Between 1980 and 2000, Europe suffered from a couple of changes in regards their economy. From the list below, which was the most significant change?

Question options: 1) Reunification of east and west Germany, European single market exchanges come into effect (commonly known as the European union), and a European single currency is created. 2) The Bank of France and the four largest deposit banks are nationalized, the US Employment Act, The Marshall Plan, the European Recovery Program, and the Organization for European Economic Cooperation were formed. 3) Huge amounts of capital was imported from Britain, the US Gold Standard and the Currency Act were originated, the Industrial Bank of Japan was founded, and the Straits Settlement (Singapore) dollar was introduced. 4) An International bank crisis started in New York and hundreds of American banks failed. In contrast, Britain weathered the storm with ease, and this motivated proposals for a system of central banks in the U.S. 5) The U.S. Postal Savings system was established. Because of opposition from commercial banks, the postal savings system did not develop in a substantial way.

Which country is leading the world in the mobile payment space?

Question options: 1) United States 2) United Kingdom 3) Japan 4) China 5) None of the above

Creditworthiness is linked to everything except:

Question options: 1) Wealth 2) Fund distribution 3) Operation of society 4) Governance of society 5) None of the above

Which of the following is an example of fiat money?

Question options: 1) a Federal Reserve Note used as money in the twenty-first century United States 2) a cowry shell used as money on a South Pacific island 3) a pound of salt used as money in medieval France 4) a gold coin used as money in nineteenth century England

Barter is

Question options: 1) an exchange of goods and services directly for goods and services. 2) the main system of exchange in the United States today. 3) the basis for economic specialization. 4) another name for money.

Which of the following is the most efficient means of trade?

Question options: 1) government rationing 2) money 3) barter 4) the combination of barter with some government rationing

By designating Federal Reserve currency as legal tender, the federal government

Question options: 1) has mandated that Federal Reserve currency be accepted for payment of debts. 2) has mandated that Federal Reserve currency be accepted by citizens of foreign countries in exchange for their countries' currencies. 3) has ensured that Federal Reserve currency will serve as money. 4) has guaranteed that Federal Reserve currency may be exchanged for an equivalent amount of gold or silver.

Fiat money

Question options: 1) is illegal in most advanced, industrial countries. 2) will generally be accepted in trade for less than its face value. 3) is usually some type of precious metal. 4) is money that would have no value if it were not usable as money.

All of the following are characteristics of debit cards EXCEPT

Question options: 1) payments are deferred until a later date. 2) they can be used like checks. 3) when used at a store, the user's bank instantly credits the store's account with the amount and deducts it from the user's account. 4) they eliminate the problem of trust since the bank's computer authorizes the transaction.

What is a wet signature?

Question options: 1) signature on art by a painter 2) signature in cement or a wet surface 3) signature on a check 4) signature that cannot be copied at all 5) a signature used to uniquely identify an individual's bank account

Using a good as a medium of exchange confers the benefit that

Question options: 1) the need to quote so many prices in trade is reduced. 2) transactions costs are increased, but they now may be paid in money terms. 3) the need for specialization is reduced. 4) the need for a double coincidence of wants is greatly increased.

Other assets are inferior to money in the sense that

Question options: 1) they are more vulnerable to losing their real value as inflation increases. 2) they increase in value more slowly than does money. 3) they have a lower overall return than money. 4) they generate transactions costs when they are exchanged for money.

In a barter system individuals

Question options: 1) will almost invariably specialize. 2) find it difficult to specialize, but may be able to do so. 3) find it impossible to specialize. 4) must be entirely self-sufficient.

By the end of 2015, how many Chinese citizens were regularly using their mobile phones to purchase goods and services?

Question options: 1)200 million 2)1 billion 3)350 million 4)20 million 5)450 thousand

What is meant by the term "WET SIGNATURE"?

Question options: 1)A signature that is process digitally 2)A first century artifact to uniquely and securely ID an individual for opening a bank account 3)A signature that is verified through the branch manager of the bank 4)A signature that is verified with two touch security 5)None of the above.

All the following are core key pieces of utility which banks have traditionally provided EXCEPT:

Question options: 1)A value store 2)Money movement 3)Access to credit 4)Money storage 5)24/7 services

Terms that relate to open banking include:

Question options: 1)APIs - Application programming interfaces 2)VPN - Virtual Private Network 3)CGI - Computer generated imagery 4)TPPs - Third party providers 5)Answers a and d are correct. 6)Answers b and c are correct.

The 2008 financial crisis was an opening opportunity for the FinTech revolution to take off. According to Mearian (2017), what of the following was influenced by the 2008 financial crisis?

Question options: 1)Commerce, payments, investments, asset management, and insurance provided the opportunity for new start-ups to emerge. 2)Large corporations, small businesses, international exchanges between companies. 3)FinTech has always existed; therefore the 2008 crisis did not really start a revolution. 4)FinTech reshaped the way business are handled. All industries have been affected by this revolution and some have experienced negative returns since then. 5)Commerce, payments, international exchanges, investments and lender companies.

Which of the following does not represent structural friction in the payment utility space

Question options: 1)Hard Currency 2)Cheque Books 3)Debit Cards 4)Mobile Wallets 5)Wire Transfer

What three core utilities did first principles thinking break down our current banking system to?

Question options: 1)Overnight loans, security, value store. 2)A value store, money movement, access to credit. 3)Ethical standards, branch location, e-signature security. 4)Tokenization, a value center, a.t.m.locations. 5)Bill pay capabilities, legacy, security.

All of the following are forms of AI we are using as consumers except for:

Question options: 1)Siri 2)Alexa 3)Cortana 4)Google Assistant 5)Bing

Which of the following is the world's largest mobile payment network?

Question options: 1)WeChat 2)Alipay 3)Visa 4)Apple Pay 5)None of the above