金融市场学练习题

American businesses get their external funds primarily frombonds and commercial paper issues.stock issues.bank loans.nonbank loans.Which of the following describes the "lemons problem?"Sellers have more information than buyers and few transactions occur.Buyers have more information than sellers and many transactions occur.Buyers have more information than sellers and few transactions occur.Sellers have more information than buyers and many transactions occur.The concept of adverse selection helps to explainwhy large, well-established corporations find it so difficult to borrow funds in securities markets.which firms are more likely to obtain funds from banks and other financial intermediaries, rather than from the securities markets.why collateral is not a common feature of many debt contracts.all of the above.The principal-agent problem arises because(a) agents have more information about their activities than do the principals.(b) monitoring agents' activities is costly.(c) principals have incentives to free-ride off the monitoring expenditures of other principals.(d) of all of the above.(e) of only (a) and (b) of the above.The fact that only large, well-established corporations have access to securities markets(a) explains why indirect finance is such an important source of external funds for businesses.(b) can be explained by the problem of adverse selection.(c) can be explained by government regulations that prohibit small firms from acquiring funds in securities markets.(d) can be explained by all of the above.(e) can be explained by only (a) and (b) of the above.Poor people have difficulty getting loans becausethey are less likely to benefit from access to financial markets.they are more likely to be dishonest.they typically have little collateral.of all of the above.of none of the above.Financial intermediaries, particularly banks,(a) are experts in the production of information about firms so that they can sort good risks from bad ones.(b) overcome the free-rider problem by primarily making private loans, rather thanpurchasing securities that are traded in the open market.(c) play a greater role in moving funds to corporations than do securities markets.(d) all of the above.(e) only (a) and (b) of the above.Economies of scale allow financial intermediaries to overcome problems of moral hazard.free-riding.high transaction costs.adverse selection.A clause in a debt contract requiring the borrower to purchase insurance against loss of the asset financed with the loan is called acollateral-insurance clause.restrictive covenant.proscriptive covenant.prescriptive covenant.If a financial crisis is thought of as a sequence of events, which of the following events would be least likely to be the initiating cause of the financial crisis?unanticipated decline in price levelstock market declineincrease in interest ratesincrease in uncertaintyMost financial crises in the United States have begun with(a) a steep stock market decline.(b) an increase in uncertainty resulting from the failure of a major firm.(c) a steep decline in interest rates.(d) all of the above.(e) only (a) and (b) of the above.Governments in developing countries sometimes adopt policies that retard the efficient operation of their financial systems. These actions include policies that(a) prevent lenders from foreclosing on borrowers with political clout.(b) nationalize banks and direct credit to politically-favored borrowers.(c) make it costly to collect payments and collateral from defaulting debtors.(d) do all of the above.(e) do only (a) and (b) of the above.______ causes a financial crisis to move into the debt-deflation phase.Increase in interest ratesStock market declineUnanticipated decline in the price levelIncrease in uncertaintyWhich of the following are reported as assets on a bank's balance sheet?(a) bank capital(b) loans(c) borrowings(d) only (a) and (b) of the aboveWhich of the following are reported as liabilities on a bank's balance sheet?reserves and cash itemssecuritiesnontransaction depositsloansOn a bank's balance sheetassets are the bank's sources of funds.liabilities are the bank's use of funds.bank capital equals assets minus liabilities.all of the above.Which of the following statements is false?The expenses involved in servicing accounts (salaries, building rent, etc.) make up over half the costs of running a bank.Transaction deposits are the primary source of bank funds.Demand deposits are checkable deposits that pay no interest.Borrowings include discount loans from the Fed and federal funds.Which of the following are nontransaction deposits?(a) savings accounts(b) small-denomination time deposits(c) certificates of deposit(d) all of the above(e) only (a) and (b) of the aboveBanks acquire the funds they use to purchase income-earning assets from such sources as(a) bank capital.(b) cash items in the process of collection.(c) reserves.(d) all of the above.(e) only (a) and (b) of the above.When $1 million is deposited at a bank, the required reserve ratio is 20 percent, and the bank chooses not to hold any excess reserves but makes loans instead, then, in the bank's final balance sheet,(a) the assets at the bank increase by $1,000,000.(b) the liabilities of the bank increase by $1,000,000.(c) reserves increase by $200,000.(d) each of the above occurs.(e) only (a) and (b) of the above occur.Bank capital(a) provides a cushion against a drop in the value of assets.(b) serves to reassure uninsured depositors that the bank is sound.(c) serves to reassure bank regulators that the bank is not likely to fail due to a few bad loans.(d) does each of the above.(e) does only (a) and (b) of the above.When a new depositor opens a checking account at the First National Bank, the bank's assets _____ and its liabilities _____.decrease; increaseincrease; decreasedecrease; decreaseincrease; increaseBanks hold excess and secondary reserves to(a) satisfy federal and state banking regulations.(b) provide for deposit outflows.(c) satisfy margin requirements.(d) do only (a) and (b) of the above.Which of the following would a bank not hold as insurance against the highest cost of deposit outflow—bank failure?mortgagessecondary reservesexcess reservesbank capitalBeing able to meet deposit outflows is the objective of ______ management.assetliabilityliquiditycapitalAs a result of changes in bank liability management practices over the past few decades, bank liabilities have grown at a slower pace than bank assets.loans have declined as a proportion of total bank assets.negotiable certificates of deposit and borrowings have increased as a proportion of total bank liabilities.banks now view their liabilities as a fixed amount to which assets must be adjusted.Dividing a bank's net income by its capital gives the bank'sreturn on equity.net interest margin.equity multiplier.return on assets.The _____ number of banks in the United States indicates that past regulation of banking fostered _____ competition among banks.large; weaksmall; weaklarge; strongsmall; strongWhich of the following statements concerning bank regulation in the United States are true?(a) The Office of the Comptroller of the Currency has the primary responsibility for state banks that are members of the Federal Reserve System.(c) The Office of the Comptroller of the Currency has sole regulatory responsibility over bank holding companies.(b) The Federal Reserve and the state banking authorities jointly have responsibility for the 1000 state banks that are members of the Federal Reserve System.(d) All of the above are true.(e) Only (a) and (b) of the above are true.Because of financial innovation, banks havesuffered a simultaneous decline of cost and income advantages.achieved competitive advantages in both acquiring and using funds.suffered a decline in their income advantages in using funds but have not experienced a decline in their cost advantages.suffered a decline in their cost advantages in acquiring funds but have not experienced a decline in their income advantages.The practice of creating marketable debt instruments that are backed by otherwise illiquid assets is known ashomogenization.standardization.liquidization.securitization.One factor contributing to the decline in cost advantages that banks once had is the increase in the importance of checkable deposits from under 20 percent of banks' liabilities to over 40 percent today.decline in the importance of savings deposits from over 60 percent of banks' liabilities to under 20 percent today.increase in the importance of savings deposits from under 20 percent of banks' liabilities to over 40 percent today.decline in the importance of checkable deposits from over 60 percent of banks' liabilities to under 10 percent today.A bank that exists only in cyberspace, with no physical location, is commonly called a ______ bank.virtualelectronicclickcyberWhich of the following have stimulated innovation in banking?Developments in information and communications technology.Increases in the volatility of interest rates.Both of the above.So-called fallen angels differ from junk bonds in that(a) junk bonds refer to newly issued bonds with low credit ratings.(b) fallen angels refer to previously issued bonds that have had their credit ratings fall below Baa.(c) fallen angels refer to newly issued bonds with low credit ratings.(d) both (a) and (b) of the above.Which of the following is not a thrift institution?mutual savings bankcredit unionsavings and loan associationcommercial bankWhich institution is typically quite small and makes a substantial portion of its loans to finance new and used automobile purchases?mutual savings bankcredit unionsavings and loan associationcommercial bankThe Federal Home Loan Bank Act of 1932required thrifts to be state chartered.gave credit unions the chance to be state chartered.gave mutual savings banks the choice of being federally chartered.gave thrifts the choice of being state or federally chartered.Financial deregulation in the 1980s led to problemscaused by a sharp decline in interest rates engineered by the Fed.even though S&L managers had the required expertise to manage risk in new lines of business.because regulators had neither the expertise nor the resources to monitor the new activities sufficiently.stemming from bad loans that were quickly overcome by expansion into new lines of business.The principal-agent problem occurs becausethe agent cannot enforce tight restrictions on the principal.the principal does not have the incentive to reduce costs.the agent and the principal have similar incentives and objectives.the agent has an incentive to do the opposite of what is in the interest of the principal.Which of the following category of financial institutions is exempt from federal taxation?mutual savings bankscredit unionscommercial bankssavings and loan associationsThe total assets of savings and loans decreased rapidly between 1988 and 1992. After 1992theycontinued to decrease but at a slower pace.began to increase at a rapid pace.remained relatively constant and then began rising in the late 1990s.remained constant.Since the early 1990s the average size of savings and loan associations has shown no upward or downward trend.increased slightly.decreased substantially.increased substantially.decreased slightly.An indicator of the resurgent health of the savings and loan industry is the fact that today goodwill accounts for a smaller amount of capital than in the 1980s.goodwill accounts for about the same amount of capital as in the 1980s.goodwill accounts for a larger amount of capital than in the 1980s.goodwill is no longer used as a part of capital.What gives the best indicator of the future of the savings and loan industry?the total assets of S&Lsthe value of goodwill of S&Lsthe average size of S&Lsthe number of S&LsCommon bond membership is the most important distinguishing feature of savings and loans.credit unions.industrial banks.mutual savings banks.Regulation and supervision of credit unions is handled bythe U.S. Central Credit Union.the Comptroller of the Currency.the National Credit Union Administration.the Office of Thrift Supervision.the Federal Reserve.。