1Copyright?2010PearsonEducationInc.PublishingasPrenticeHallFoundationsofFinancialMarketsandInstitutions,4e(Fabozzi/Modigliani/Jones)Chapter2FinancialInstitutions,FinancialIntermediaries,andAssetManagementFirmsMultipleChoiceQuestions1FinancialInstitutions1)Financialenterprises,morepopularlyreferredtoasfinancialinstitutions,provideavarietyofservices.WhichofthebelowisNOToneofthese?A)Transformfinancialassetsacquiredthroughthemarketandconstitutingthemintoadifferent,andmorewidelypreferable,typeofasset–whichbecomestheirliability.B)Exchangefinancialassetsonbehalfofcustomersbutnotfortheirownaccounts.C)Managetheportfoliosofothermarketparticipants.D)Assistinthecreationoffinancialassetsfortheircustomers,andthensellthosefinancialassetstoothermarketparticipants.Answer:BComment:Financialenterprisesexchangefinancialassetsbothonbehalfofcustomersandfortheirownaccounts.Diff:2Topic:2.1FinancialInstitutionsObjective:2.1thebusinessoffinancialinstitutions2)Financialintermediariesinclude________thatacquirethebulkoftheirfundsbyofferingtheirliabilitiestothepublicmostlyintheformofdeposits;insurancecompanies,pensionfunds,andfinancecompanies.A)depositoryinstitutionsB)utilitiesC)initialpublicofferingsD)preferredequityinstrument.Answer:ADiff:1Topic:2.1FinancialInstitutionsObjective:2.1thebusinessoffinancialinstitutions2Copyright?2010PearsonEducationInc.PublishingasPrenticeHall3)Somenonfinancialenterpriseshavesubsidiariesthatprovidefinancialservices.Thesefinancialinstitutionsarecalled________.A)freefinancecompanies.B)captivefinancecompanies.C)captiveinvestmentcompanies.D)captivefinanceshares.Answer:BComment:Somenonfinancialenterpriseshavesubsidiariesthatprovidefinancialservices.Forexample,manylargemanufacturingfirmshavesubsidiariesthatprovidefinancingfortheparentcompany’scustomer.Thesefinancialinstitutionsarecalledcaptivefinancecompanies.ExamplesincludeGeneralMotorsAcceptanceCorporation(asubsidiaryofGeneralMotors)andGeneralElectricCreditCorporation(asubsidiaryofGeneralElectric).Diff:2Topic:2.1FinancialInstitutionsObjective:2.1thebusinessoffinancialinstitutions4)Depositoryinstitutionsinclude________.A)commercialbanks.B)savingsandloanassociations.C)savingsbanksandcreditunions.D)AlloftheseAnswer:DDiff:1Topic:2.1FinancialInstitutionsObjective:2.1thebusinessoffinancialinstitutions2RoleofFinancialIntermediaries1)Financialintermediariesgetfundsbyissuingfinancialclaimsagainstthemselvestomarketparticipants,andtheninvestingthosefunds.Theinvestmentsmadebyfinancialintermediariescanbein________.A)loansbutnotinsecurities.B)securitiesbutnotinloans.C)loansand/orsecurities.D)onlyequity.Answer:CDiff:1Topic:2.2RoleofFinancialIntermediariesObjective:2.2theroleoffinancialintermediaries3Copyright?2010PearsonEducationInc.PublishingasPrenticeHall2)Financialintermediariesplaythebasicroleoftransformingfinancialassetsthatarelessdesirableforalargepartofthepublicintootherfinancialassets(theirownliabilities)whicharemorewidelypreferredbythepublic.Thistransformationinvolvesatleastoneoffoureconomicfunctions.WhichofthebelowisNOToneofthesefunctions?A)providingmaturityintermediationB)enhancingriskviadiversificationC)reducingthecostsofcontractingandinformationprocessingD)providingapaymentsmechanismAnswer:BComment:Financialintermediariesplaythebasicroleoftransformingfinancialassetsthatarelessdesirableforalargepartofthepublicintootherfin...
