Financial Institutions Quiz
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Questions and Answers

What is the primary source of funds for commercial banks?

  • Corporate bonds
  • Employer contributions
  • Premiums from policies
  • Deposits (correct)
  • Which type of financial intermediary primarily uses premiums from policies as their source of funds?

  • Savings and loan associations
  • Credit unions
  • Life insurance companies (correct)
  • Pension funds
  • What are municipalities likely to finance through the use of their assets?

  • Home equity loans
  • Corporate bonds
  • Municipal bonds (correct)
  • U.S. government securities
  • What type of loans are primarily associated with savings and loan associations?

    <p>Mortgages</p> Signup and view all the answers

    Which financial intermediary is most likely to use employer and employee contributions as their main source of funds?

    <p>Pension funds</p> Signup and view all the answers

    What is the primary purpose of the Securities and Exchange Commission (SEC)?

    <p>Ensure fair trading practices on organized exchanges</p> Signup and view all the answers

    Which regulatory agency is responsible for regulating futures market exchanges?

    <p>Commodities Futures Trading Commission</p> Signup and view all the answers

    What type of institutions does the Office of the Comptroller of the Currency primarily regulate?

    <p>Federally-chartered commercial banks</p> Signup and view all the answers

    What restrictions does the National Credit Union Administration (NCUA) impose on credit unions?

    <p>Restrictions on assets they can hold</p> Signup and view all the answers

    Which of the following best describes the regulations enforced by the SEC regarding insider trading?

    <p>It restricts insider trading to maintain market integrity</p> Signup and view all the answers

    What distinguishes direct finance from indirect finance?

    <p>Direct finance involves selling securities to lenders.</p> Signup and view all the answers

    Which of the following best describes the role of financial markets?

    <p>They channel funds from savers to those in need of funds.</p> Signup and view all the answers

    What type of market facilitates the initial issuance of securities?

    <p>Primary market</p> Signup and view all the answers

    Which of the following is NOT a function of financial markets?

    <p>Increasing transaction costs for buyers and sellers.</p> Signup and view all the answers

    What are the primary participants in secondary markets?

    <p>Brokers and dealers</p> Signup and view all the answers

    Which type of financial instrument is characterized by guarantees of fixed payments over time?

    <p>Debt instruments</p> Signup and view all the answers

    How do financial intermediaries utilize risk sharing?

    <p>To distribute and minimize risk among various investors.</p> Signup and view all the answers

    What element is critical to ensuring that financial markets function effectively?

    <p>Transparency of information</p> Signup and view all the answers

    What are the primary assets of finance companies?

    <p>Consumer and business loans</p> Signup and view all the answers

    Which type of intermediary primarily uses shares as their primary liability?

    <p>Mutual funds</p> Signup and view all the answers

    Which financial intermediary had the largest value of assets in 2016?

    <p>Commercial banks</p> Signup and view all the answers

    Which of the following is NOT an asset typically associated with hedge funds?

    <p>Consumer loans</p> Signup and view all the answers

    What type of financial intermediary utilizes commercial paper as a primary liability?

    <p>Finance companies</p> Signup and view all the answers

    In 1990, what was the value of assets held by life insurance companies?

    <p>$1,367 billion</p> Signup and view all the answers

    Which type of intermediary primarily uses stocks and bonds as assets?

    <p>Hedge funds</p> Signup and view all the answers

    Which financial intermediary had the smallest asset value in 2016?

    <p>Credit unions</p> Signup and view all the answers

    What is the main purpose of financial intermediaries in the context of indirect finance?

    <p>To lower transaction costs and reduce risk for investors</p> Signup and view all the answers

    Which type of loans is least likely to be affected by asymmetric information problems?

    <p>State and local government bonds</p> Signup and view all the answers

    What characterizes a Eurobond?

    <p>Denominated in a currency other than that of the country where it is sold</p> Signup and view all the answers

    Which of the following best describes 'moral hazard' as it relates to financial transactions?

    <p>Borrower engaging in riskier behavior after receiving funds</p> Signup and view all the answers

    Among the following, which financial instrument typically involves the least risk for investors?

    <p>Government agency securities</p> Signup and view all the answers

    Which of the following best illustrates the concept of 'risk sharing' in financial intermediation?

    <p>Investing in a diverse portfolio of assets</p> Signup and view all the answers

    What role do world stock markets play in relation to U.S. corporations?

    <p>They help finance corporations and the U.S. federal government.</p> Signup and view all the answers

    Which of the following is NOT a benefit provided by financial intermediaries?

    <p>Issuing bonds directly to investors</p> Signup and view all the answers

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