Question 1

In 2008, as a result of a run on government-sponsored enterprise debt, the U.S.Treasury placed Fannie Mae and Freddie Mac in:

Accepted Answer

A)  conservatorship
B)  receivership
C)  bankruptcy
D)  restriction

Question 2

Which of the following statements most accurately describes the state of banking in the U.S.?

Accepted Answer

A)  A large number of large banks and a small number of small banks
B)  A large number of large and small banks
C)  A small number of large and small banks
D)  A large number of small banks and a small number of large banks

Question 3

In most companies, an employee must work for a number of years before qualifying for pension benefits.This process is referred to as:

Accepted Answer

A)  A defined-benefit period
B)  Vesting
C)  Regulated contribution period
D)  Mandatory benefit pending

Question 4

Lloyd's of London is perhaps most known for:

Accepted Answer

A)  Being the largest insurance company in the world
B)  Going out of business when it insured too many odd risks
C)  Being the best-known insurance company in the world
D)  Being the oldest insurance company in the world

Question 5

One of the results of the limit on bank branching was:

Accepted Answer

A)  Increased diversification in the loan portfolio of small banks
B)  Curtailment of credit availability for borrowers in small towns
C)  Lower profits for banks
D)  Increased efficiency in the operations of banks

Question 6

Catastrophe bonds or "cat bonds" were developed:

Accepted Answer

A)  By reinsurance companies to finance their growth
B)  As an alternative to purchasing reinsurance
C)  Prior to the creation of reinsurance companies but are being phased out
D)  By the U.S.government to provide insurance against national disasters

Question 7

Often Eurodollar deposits earn higher returns than U.S.bank deposits for all of the following reasons except:

Accepted Answer

A)  Eurodollar deposits are not subject to U.S.reserve requirements
B)  The bank does not have to pay deposit insurance premiums on these deposits
C)  Regulatory compliance may be more costly for a foreign bank than a U.S.bank
D)  Taxes on the profits at foreign banks may be lower than those for U.S.banks, allowing for higher returns

Question 8

How might Freddie Mac and Fannie Mae have contributed to the financial crisis experienced in the United States in 2007-2009?

Accepted Answer

Prior to the financial crisis Federal Re...

Question 9

The Reigle-Neal Interstate Banking and Branching Efficiency Act has allowed banks to diversify themselves geographically.Has this geographical expansion resulted in the harm to consumers that early supporters of anti-branching laws feared? Explain.

Accepted Answer

As the text points out, the results have...

Question 10

Evaluate the pros and cons of the repeal of the Glass-Steagall Act of 1933.

Accepted Answer

The Glass-Steagall Act by Congress in 19...

Question 11

The actual results of the McFadden Act included:

Accepted Answer

A)  Increased efficiency of banking across the country
B)  A tight network of interconnected banks across the country
C)  A safety net that allowed small inefficient banks to continue to operate
D)  The elimination of banking monopolies

Question 12

Which of the following is an example that can help explain increased profits for large financial holding companies?

Accepted Answer

A)  Financial holding companies offer a wide array of services under many brand names
B)  Financial holding companies need only one CEO, one Board of Directors, and one computer system regardless of size
C)  Financial holding companies are not well diversified and receive a higher return for the higher risk
D)  Financial holding companies are exempt from having to pay for FDIC insurance

Question 13

Prior to the Civil War most state banks issued their own banknotes.This resulted in all of the following problems except:

Accepted Answer

A)  Their values decreased as the holder moved further from the bank
B)  They were worthless if the bank failed
C)  They were not efficient as a means of payment if the holder was far from the bank
D)  They were usually redeemable in gold

Question 14

Reinsurance is used by insurance companies faced with:

Accepted Answer

A)  The prospects of a large but diversified risk
B)  Inadequate capital to handle a potential loss
C)  Insolvency
D)  The problem of moral hazard B

Question 15

In order for insurance companies to generate predictable payouts, they need to:

Accepted Answer

A)  Spread the risk across many policies
B)  Accept policyholders from a very specific geographic area
C)  Focus on insuring only specific events, for example only fire
D)  Offer only life insurance

Question 16

A very controversial issue in many states currently is whether or not insurance companies should be allowed to use a person's credit history as a tool in determining the individual's automobile and homeowner insurance premium.Without getting into the legal or ethical issues, what do you think the insurance companies' motives might be for wanting to use the credit report?

Accepted Answer

This could be an information issue.It is...

Question 17

Which of the following is an example of the economies of scale argument for increased profits for large financial holding companies?

Accepted Answer

A)  Financial holding companies offer a wide array of services under one name
B)  Financial holding companies need only one CEO, one Board of Directors, and one accounting system regardless of size
C)  Financial holding companies are well diversified so risk is reduced
D)  The profitability of financial holding companies does not rely on one particular line of business

Question 18

One way insurance companies deal with the problem of adverse selection is by:

Accepted Answer

A)  Charging the same price to everyone
B)  Screening applicants
C)  Monitoring policyholders after they have purchased insurance
D)  Spreading the risk in the same geographic area

Question 19

The sharp reduction in the number of banks that has occurred since the mid 1990s has been due primarily to:

Accepted Answer

A)  Bank failures from increased competition
B)  Bank mergers
C)  The closing of banks by federal regulators
D)  The revoking of state bank charters B

Question 20

Over the last twenty years in the U.S., the number of banks has:

Accepted Answer

A)  Steadily increased
B)  Stayed about the same
C)  Steadily decreased
D)  More than doubled C

Exam 13: Financial Industry Structure

In 2008, as a result of a run on government-sponsored enterprise debt, the U.S.Treasury placed Fannie Mae and Freddie Mac in:

Correct Answer
verified

Which of the following statements most accurately describes the state of banking in the U.S.?

Correct Answer
verified

In most companies, an employee must work for a number of years before qualifying for pension benefits.This process is referred to as:

Correct Answer
verified

Lloyd's of London is perhaps most known for:

Correct Answer
verified

One of the results of the limit on bank branching was:

Correct Answer
verified

Catastrophe bonds or "cat bonds" were developed:

Correct Answer
verified

Often Eurodollar deposits earn higher returns than U.S.bank deposits for all of the following reasons except:

Correct Answer
verified

How might Freddie Mac and Fannie Mae have contributed to the financial crisis experienced in the United States in 2007-2009?

Correct Answer
verified
Prior to the financial crisis Federal Re...
View Answer

The Reigle-Neal Interstate Banking and Branching Efficiency Act has allowed banks to diversify themselves geographically.Has this geographical expansion resulted in the harm to consumers that early supporters of anti-branching laws feared? Explain.

Correct Answer
verified
As the text points out, the results have...
View Answer

Evaluate the pros and cons of the repeal of the Glass-Steagall Act of 1933.

Correct Answer
verified
The Glass-Steagall Act by Congress in 19...
View Answer

The actual results of the McFadden Act included:

Correct Answer
verified

Which of the following is an example that can help explain increased profits for large financial holding companies?

Correct Answer
verified

Prior to the Civil War most state banks issued their own banknotes.This resulted in all of the following problems except:

Correct Answer
verified

Reinsurance is used by insurance companies faced with:

Correct Answer
verified
B

In order for insurance companies to generate predictable payouts, they need to:

Correct Answer
verified

Correct Answer
verified
This could be an information issue.It is...
View Answer

Which of the following is an example of the economies of scale argument for increased profits for large financial holding companies?

Correct Answer
verified

One way insurance companies deal with the problem of adverse selection is by:

Correct Answer
verified

The sharp reduction in the number of banks that has occurred since the mid 1990s has been due primarily to:

Correct Answer
verified
B

Over the last twenty years in the U.S., the number of banks has:

Correct Answer
verified
C

Exam 13: Financial Industry Structure

In 2008, as a result of a run on government-sponsored enterprise debt, the U.S.Treasury placed Fannie Mae and Freddie Mac in:

Correct AnswerverifiedShow Answer

Which of the following statements most accurately describes the state of banking in the U.S.?

Correct AnswerverifiedShow Answer

In most companies, an employee must work for a number of years before qualifying for pension benefits.This process is referred to as:

Correct AnswerverifiedShow Answer

Lloyd's of London is perhaps most known for:

Correct AnswerverifiedShow Answer

One of the results of the limit on bank branching was:

Correct AnswerverifiedShow Answer

Catastrophe bonds or "cat bonds" were developed:

Correct AnswerverifiedShow Answer

Often Eurodollar deposits earn higher returns than U.S.bank deposits for all of the following reasons except:

Correct AnswerverifiedShow Answer

How might Freddie Mac and Fannie Mae have contributed to the financial crisis experienced in the United States in 2007-2009?

Correct AnswerverifiedPrior to the financial crisis Federal Re...View AnswerShow Answer

The Reigle-Neal Interstate Banking and Branching Efficiency Act has allowed banks to diversify themselves geographically.Has this geographical expansion resulted in the harm to consumers that early supporters of anti-branching laws feared? Explain.

Correct AnswerverifiedAs the text points out, the results have...View AnswerShow Answer

Evaluate the pros and cons of the repeal of the Glass-Steagall Act of 1933.

Correct AnswerverifiedThe Glass-Steagall Act by Congress in 19...View AnswerShow Answer

The actual results of the McFadden Act included:

Correct AnswerverifiedShow Answer

Which of the following is an example that can help explain increased profits for large financial holding companies?

Correct AnswerverifiedShow Answer

Prior to the Civil War most state banks issued their own banknotes.This resulted in all of the following problems except:

Correct AnswerverifiedShow Answer

Reinsurance is used by insurance companies faced with:

Correct AnswerverifiedB

In order for insurance companies to generate predictable payouts, they need to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThis could be an information issue.It is...View AnswerShow Answer

Which of the following is an example of the economies of scale argument for increased profits for large financial holding companies?

Correct AnswerverifiedShow Answer

One way insurance companies deal with the problem of adverse selection is by:

Correct AnswerverifiedShow Answer

The sharp reduction in the number of banks that has occurred since the mid 1990s has been due primarily to:

Correct AnswerverifiedB

Over the last twenty years in the U.S., the number of banks has:

Correct AnswerverifiedC

Correct Answer
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Correct Answer
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Correct Answer
verified
Prior to the financial crisis Federal Re...
View Answer

Correct Answer
verified
As the text points out, the results have...
View Answer

Correct Answer
verified
The Glass-Steagall Act by Congress in 19...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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B

Correct Answer
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Correct Answer
verified
This could be an information issue.It is...
View Answer

Correct Answer
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Correct Answer
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B

Correct Answer
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C