Banks have a maturity mismatch since

Banks have a maturity mismatch since 

A) they borrow short term, but lend long term.
B) they borrow long term, but lend short term.
C) some of their borrowings are short term while others are long term.
D) some of their loans are short term while others are long term.







Answer: A

Which government agency regulates futures markets?

Which government agency regulates futures markets?

A) the Federal Futures Agency
B) Board of Trade
C) SEC
D) Commodity Futures Trading Commission







Answer: D

What regulatory change did Congress approve in 2010 to reduce counterparty risk in the shadow banking system?

What regulatory change did Congress approve in 2010 to reduce counterparty risk in the shadow banking system? 

A) trading of derivatives to take place in exchanges
B) require increased collateral for those trading derivatives
C) banned trading of mortgage-backed securities
D) required investment banks to follow the same rules on leverage as commercial banks







Answer: A

The shadow banking system refers to

The shadow banking system refers to

A) commercial banks.
B) nonbank financial institutions such as investment banks and hedge funds.
C) community banks.
D) pawn shops and institutions that offer payday loans.







Answer: B

Which of the following is likely to be more of a problem after the introduction of deposit insurance?

Which of the following is likely to be more of a problem after the introduction of deposit insurance?

A) moral hazard
B) contagion
C) adverse selection
D) bank runs









Answer: A

Which of the following is NOT a reason that firms in the shadow banking system were more vulnerable than commercial banks during the financial crisis of 2007-2009?

Which of the following is NOT a reason that firms in the shadow banking system were more vulnerable than commercial banks during the financial crisis of 2007-2009? 

A) They made investments that would lose value if housing prices decline.
B) They were more heavily regulated than commercial banks, making them less able to adjust to changing market conditions.
C) They could invest in riskier assets.
D) Investors had no insurance against loss of principal.








Answer: B

The largest institutional participants in capital markets are

The largest institutional participants in capital markets are 

A) consumer finance companies.
B) business finance companies.
C) pension funds.
D) insurance companies.






Answer: C

Charging drivers with good records lower premiums than drivers with bad records is an example of an attempt by insurance companies to deal with the problem of

Charging drivers with good records lower premiums than drivers with bad records is an example of an attempt by insurance companies to deal with the problem of 

A) adverse selection.
B) moral hazard.
C) failure of policyholders to keep paying their premiums.
D) drunk driving.








Answer: A

In a defined contribution pension plan,

In a defined contribution pension plan, 

A) if the funds in the pension plan exceed the amount promised, the excess accrues to the issuing firm or institution.
B) the employee is promised an assigned benefit based on earnings and years of service.
C) all earnings are taxable as regular income.
D) pension income varies depending on how well the plan's investments have done.







Answer: D

Hedge funds have been criticized for

Hedge funds have been criticized for 

A) forcing quick price changes that reduce market inefficiencies.
B) their heavy use of short selling.
C) their inability to mobilize a large amount of funds.
D) excessive use of hedging strategies.







Answer: B

Which of the following statements is NOT true of consumer finance companies?

Which of the following statements is NOT true of consumer finance companies?

A) They are strictly regulated by state governments.
B) They charge higher interest rates than banks do on similar loans.
C) They lend primarily to consumers.
D) Their borrowers have higher default risk than bank customers







Answer: A

The fee charged by a typical hedge fund are sometimes called:

The fee charged by a typical hedge fund are sometimes called:

A) hedging premiums
B) 12b-1 fees
C) carried interest
D) loads








Answer: C

Mutual funds

Mutual funds 

A) sell shares to savers and purchase assets with the funds.
B) take in deposits from savers and make loans to borrowers.
C) bring together small savers and small borrowers.
D) take in deposits from savers and purchase assets with the funds.








Answer: A

During the financial crisis, which type of risk was the biggest problem faced by investment banks?

During the financial crisis, which type of risk was the biggest problem faced by investment banks? 

A) hedging risk
B) credit risk
C) interest-rate risk
D) currency risk









Answer: B

A syndicate is

A syndicate is 

A) a group of brokers illegally making use of insider information.
B) a group of dealers that markets a government bond issue.
C) a group of commercial banks that agrees to accept the checks of each other's depositors.
D) a group of investment banks underwriting a large security issue.







Answer: D

The due diligence process refers to

The due diligence process refers to 

A) the review of a prospectus by the SEC.
B) the situation in which an investment bank researches a firm's value.
C) how an investment bank underwrites large issues.
D) the process by which a firm chooses an investment bank.







Answer: B

The Federal Reserve System was created in response to

The Federal Reserve System was created in response to 

A) difficulties of the free-banking era.
B) the banking panic of 1907.
C) the ending of the Civil War.
D) the stock market crash of 1929.








Answer: B

National banks are chartered by the

National banks are chartered by the 

A) Office of Management and the Budget.
B) Office of Bank Supervision.
C) Securities and Exchange Commission.
D) Office of the Comptroller of the Currency.









Answer: D

All of the following have contributed to increased use of ATMs EXCEPT:

All of the following have contributed to increased use of ATMs EXCEPT:

A) some banks charging customers for services performed by tellers than can be done by ATMs
B) increased use of debit cards for transactions
C) some banks closing branches in low-income neighborhoods
D) ease by which customers can make use of ATMs to make deposits and withdrawals








Answer: B

If you have $2 million in a CD at a commercial bank that is a member of the FDIC, how much of your funds are uninsured?

If you have $2 million in a CD at a commercial bank that is a member of the FDIC, how much of your funds are uninsured?

A) $0
B) $1 million
C) $2 million
D) $1.75 million







Answer: D